What is Selling, General and Administrative? SG&A Meaning & Definition

definition of sg&a

The Structured Query Language comprises several different data types that allow it to store different types of information… If SG&A is a consolidated, one-line item, the analyst must use discretion to select one of these methods to account for all the various expenses baked into that one line item. But as mentioned earlier, SG&A can be broken out individually depending on the size of the cost and relevance to the core business model.

What does Ebitda stand for?

What is EBITDA? EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. EBITDA measures the company's overall financial performance. It is often used as an alternative to other metrics, including earnings, revenue, and income.

Since SG&A expenses are not a product cost, they are not assigned to the cost of goods sold or to the goods that are in inventory. SG&A expenses are the indirect costs of operating the business day-to-day. SG&A has sg&a meaning a very specific place on a company’s income statement. Net revenue is always reported at the top, then COGS is deducted to arrive at the gross margin. SG&A and any other expenses are listed below the gross margin.

What Is an Income Statement and How to Make One

Even small businesses and startups can benefit from accounting software that can unify your financial data, including expenses, sales and even payroll. To accurately project future SG&A costs, some companies attempt to forecast each individual component. Some fixed costs, such as office rent, may be quite predictable. Other SG&A costs, such as shipping costs or sales commissions, https://www.bookstime.com/ will vary. Still others, such as the costs of renting new retail locations or deploying a new website, are linked to business strategy, and accurate SG&A projections depend on researching the potential costs. SG&A is part of a company’s operating expenses, and some companies, especially smaller firms, use the terms SG&A and operating expenses interchangeably.

Is depreciation A SG&A?

SG&A includes all non-production expenses incurred by a company in any given period. It includes expenses such as rent, advertising, marketing, accounting, litigation, travel, meals, management salaries, bonuses, and more. On occasion, it may also include depreciation expense, depending on what it's related to.

Sometimes to boost profitability, these costs need to be regularized. Direct expenses are shipping expenses of the product and sales commissions.

SG&A Ratio Calculation Example

This includes wages and commissions paid to the sales team, as well as the salaries paid to administrative personnel, accountants and engineers. Officer salaries and fees are SG&A expenses, as are employee bonuses and pension costs.

These activities create demand for the company’s business and broadly categorized as “selling”. Therefore, the expenses a company incurs due to these selling activities are included in the SG&A Expense.

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