Selling, General & Administrative Expenses (SG&A)
Non-production operating costs including marketing, executive salaries, and office expenses, representing overhead required to run the business beyond direct product costs.
Selling, General & Administrative Expenses (SG&A)
Non-production operating costs that include all selling expenses, such as marketing and commissions, plus general and administrative expenses, such as executive salaries, legal fees, and office expenses.
For example, a manufacturing company’s quarterly SG&A might include $2 million in marketing and advertising, $1.5 million in sales commissions, $3 million in administrative salaries, $800,000 in rent for offices, and $700,000 in professional services.
SG&A represents the overhead required to run a business beyond direct product or service costs. It appears on the income statement after gross profit and is often analyzed as a percentage of revenue to assess operational efficiency. While essential for business operation, excessive SG&A can erode profitability, making it a common target for cost-cutting initiatives. The optimal SG&A ratio varies significantly by industry, with retail and consumer products typically having higher selling expenses than industrial manufacturers or utilities.