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. Tips For When To Buy, Sell Or Hold
    Brokers

    Tips For When To Buy, Sell Or Hold

  2. Evaluating A Company's Management
    Active Trading Fundamentals

    Evaluating A Company's Management

  3. What Is A Cash Flow Statement?
    Markets

    What Is A Cash Flow Statement?

  4. Spotting Cash Cows
    Investing

    Spotting Cash Cows

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center