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.

INVESTOPEDIA EXPLAINS '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. Appropriation

    1. The act of setting aside money for a specific purpose. A company ...
  5. Cost Of Goods Sold - COGS

    The direct costs attributable to the production of the goods ...
  6. Expense

    1. The economic costs that a business incurs through its operations ...
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. Fundamental Analysis

    What is the difference between a capital gearing ratio and a net gearing ratio?

    Understand the definition of gearing in the finance industry, the difference between net gearing and capital gearing ratios and how they are interpreted.
  6. Fundamental Analysis

    What is the difference between interest coverage ratio and DSCR?

    Understand the basics of the interest coverage ratio and the debt-service coverage ratio, including calculations and how each type reflects financial stability.
  7. Investing Basics

    What is the difference between interest coverage ratio and TIE?

    Read about the times interest earned, also known as the interest coverage ratio. Find out why this is an important ratio for investors and creditors.
  8. Investing Basics

    When are expenses and revenues counted in accrual accounting?

    Take an in-depth look at the treatment of revenues and expenses within the accrual method of accounting and learn why many consider it superior to cash accounting.
  9. Investing Basics

    What is accrual accounting used for in finance?

    Read about the accrual method of accounting, its uses and rules, and why it is considered so important for investors, lenders and managers.
  10. Fundamental Analysis

    When does a business report gross margins?

    Learn how gross margins are calculated and when publicly traded companies release these figures. Explore consensus street estimates.

You May Also Like

Hot Definitions
  1. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  2. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  3. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  4. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  5. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  6. Law Of Supply And Demand

    A theory explaining the interaction between the supply of a resource and the demand for that resource. The law of supply ...
Trading Center