Selling, General & Administrative Expense - SG&A

AAA

DEFINITION of 'Selling, General & Administrative Expense - SG&A'

Reported on the income statement, it is the sum of all direct and indirect selling expenses and all general and administrative expenses of a company.

Direct selling expenses are expenses that can be directly linked to the sale of a specific unit such as credit, warranty and advertising expenses. Indirect selling expenses are expenses which cannot be directly linked to the sale of a specific unit, but which are proportionally allocated to all units sold during a certain period, such as telephone, interest and postal charges. General and administrative expenses include salaries of non-sales personnel, rent, heat and lights.

BREAKING DOWN 'Selling, General & Administrative Expense - SG&A'

High SG&A expenses can be a serious problem for almost any business. Examining this figure as a percentage of sales or net income compared to other companies in the same industry can give some idea of whether management is spending efficiently or wasting valuable cash flow. For example, in the television industry businesses that depend on a great deal of advertising must carefully monitor their marketing expenses. A good management team will often attempt to keep SG&A expenses under tight control and limited to a certain percentage of revenue by reducing corporate overhead (i.e. cost-cutting, employee lay-offs).

RELATED TERMS
  1. Administrative Accounting

    The financial reporting of factors that influence decision making, ...
  2. Administrative Expenses

    The expenses that an organization incurs not directly tied to ...
  3. Chasing Nickels Around Dollar Bills

    A slang term describing what a company's management does when ...
  4. Expense

    1. The economic costs that a business incurs through its operations ...
  5. Cost Of Goods Sold - COGS

    The direct costs attributable to the production of the goods ...
  6. Income Statement

    A financial statement that measures a company's financial performance ...
Related Articles
  1. Brokers

    Tips For When To Buy, Sell Or Hold

    Knowing how to make sound snap decisions is a must for any broker.
  2. Active Trading Fundamentals

    Evaluating A Company's Management

    Financial statements don't tell you everything about a company's health. Investigate the management behind the numbers!
  3. Markets

    What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
  4. Investing

    Spotting Cash Cows

    We show you why some of these companies stand apart from the herd.
  5. Investing

    How To Calculate Minority Interest

    Minority interest calculations require the use of minority shareholders’ percentage ownership of a subsidiary, after controlling interest is acquired.
  6. Investing Basics

    3 Companies That Hate Debt Financing

    Learn how companies such as Chipotle, Bed Bath & Beyond, and Paychex are able to maintain impressive levels of growth without debt financing.
  7. Term

    What is Incremental Cost?

    Incremental cost is the added cost of manufacturing one more unit.
  8. Term

    What is Horizontal Analysis?

    Horizontal analysis compares a company’s balance sheet or income statement over two or more accounting periods.
  9. Stock Analysis

    How MetLife Became a Global Insurance Giant

    MetLife is the largest life insurer in the United States. Here's how it has managed to stay on top.
  10. Economics

    Explaining Double Entry Accounting

    Double entry is an accounting and bookkeeping term describing the method of entering transactions into the accounting records.
RELATED FAQS
  1. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>
  2. What are average operating expenses for the oil and gas sector?

    The oil and gas sector plays an important role in the economy by drilling, extracting, and processing oil and gas. Because ... Read Full Answer >>
  3. How does inventory accounting differ between GAAP and IFRS?

    There are three common methods for inventory accountability costs: weighted-average cost method; first in, first out, or ... Read Full Answer >>
  4. Why should investors pay attention to a corporation's selling, general and administrative ...

    Selling, general and administrative expenses (SG&A) are significant elements of many companies' income statements. These ... Read Full Answer >>
  5. How is absorption costing treated under GAAP?

    Under generally accepted accounting principles (GAAP), absorption costing is required for external reporting. All normal ... Read Full Answer >>
  6. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  2. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  3. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  4. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  5. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
  6. Marlboro Friday

    A reference to Friday, April 2, 1993, when Philip Morris, the maker of Marlboro cigarettes, announced that it would be cutting ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!