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. Cost Of Goods Sold - COGS

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

    1. The economic costs that a business incurs through its operations ...
  5. Income Statement

    A financial statement that measures a company's financial performance ...
  6. Chasing Nickels Around Dollar Bills

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

    When do companies publish P&L statements?

    Understand what a company's P&L statement represents, and find out when companies traditionally publish these statements.
  6. Active Trading Fundamentals

    What is liquidity management?

    Take a look at the different definitions of liquidity, and find out how investors and businesses attempt to reduce exposure to liquidity risk.
  7. Fundamental Analysis

    What is the difference between operating income and net income?

    Understand the difference between operating income and net income, including the calculations and interpretations of each when reading a balance sheet.
  8. Fundamental Analysis

    What is the difference between operating income and EBITDA?

    Read about the major differences between earnings before interest, taxes, depreciation and amortization (EBITDA) and operating income in a company's financial health.
  9. Fundamental Analysis

    What is the difference between operating income and gross profit?

    Learn more about the difference between operating income and gross profit, two accounting figures that appear on a company's income statement.
  10. Investing Basics

    Is operating profit the same as net income?

    Understand the difference between operating profit and net income, including how each type relates to the other and how both are derived from company revenue.

You May Also Like

Hot Definitions
  1. Risk-Free Rate Of Return

    The theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would ...
  2. Scarcity

    The basic economic problem that arises because people have unlimited wants but resources are limited. Because of scarcity, ...
  3. Trust Fund

    A trust fund is a fund comprised of a variety of assets intended to provide benefits to an individual or organization. The ...
  4. Christmas Tree

    An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at ...
  5. Christmas Club

    A short-term savings account that usually pays out the full account balance to its account holders once each year, right ...
  6. Boston Snow Indicator

    A market theory that states that a white Christmas in Boston will result in rising stock prices for the following year. For ...
Trading Center