This is not an argument over the definition of "cost of goods sold" nor does it change the fact that profit margins declined by 80%!
CAGR forecast profit margins of 300%-500% and offered this as guidance. Certainly they must have included all costs associated with "cost of goods sold" in their guidance.
Whether you want to say products were being sold for less or cost went up it matters not! Profit margins still declined by 80%!
And using current profit margins CAGR must increase sales 7 fold to cover expenses!
How did we get to 20% margin from a 300%-500% forecast? Extremely poor guidance by management. It means they're off by a factor of 15-25X.
Do any of these so called "experts" on CAGR know anything about business and finance?
Name 1 company that has shown a profit in it's first year of operations. It just doesn't happen, there are too many start up expenses in the first couple of years to possibly show a profit and positive cash flow.
The reason why the gross margin went down significantly is not because they are selling each unit at a loss, it's because there are other expenses associated with "Cost of Sales" (thats a term we accountants use). Cost of Sales includes inventory purchases, freight and shipping costs, direct payroll associated with sales, and could also include trade shows and showcases directly related to sales. Put all that together, and yes it will reduce their gross margin when they only had inventory purchases in the prior years.
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