SG&A (Selling, General, and Administrative Expenses)

Definition

Selling, general, and administrative expenses (SG&A) are part of a company's income statement. These include all administrative and general expenses apart from direct and indirect costs of sales. This expense line item covers most of the business's costs that are not directly related to the making/providing of the product/service. SG&A mostly represents the costs of managing the business and delivery of product/service.

Example

Salaries and benefits of the company's staff that are not directly working in the manufacturing or production departments, rent, insurance cost, marketing and promotion cost, accounting costs, legal fees, and office supplies, are some examples of SG&A expenses.

Why it matters

Companies must monitor their SG&A expenses to control costs, especially if they are on a consistent rise vis-a-vis the company's earnings. Businesses must especially focus on the pattern of overspending to begin making adjustments to such expenses. If left unchecked, these can negatively impact the company’s profitability.

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