# Selling, General, & Administrative Expense (SG&A)

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## Definition of 'Selling, General, & Administrative Expense (SG&A)'

**Selling, General, & Administrative Expense (SG&A)**

Selling, general, and administrative expenses (SG&A) are the costs incurred by a company in order to conduct its business. These expenses include marketing, sales, research and development, and general and administrative costs. SG&A expenses are not directly related to the production of goods or services, but are necessary for the company to operate.

**Marketing expenses** are the costs incurred in promoting a company's products or services. These expenses include advertising, public relations, and sales promotion.

**Sales expenses** are the costs incurred in selling a company's products or services. These expenses include commissions, sales salaries, and travel expenses.

**Research and development expenses** are the costs incurred in developing new products or services. These expenses include research salaries, laboratory costs, and equipment costs.

**General and administrative expenses** are the costs incurred in running a company's day-to-day operations. These expenses include office rent, salaries, and utilities.

SG&A expenses are an important part of a company's financial statements. They are used to calculate a company's gross profit and operating income. SG&A expenses are also used to compare a company's performance to its competitors.

**How to calculate SG&A**

SG&A expenses are calculated by adding together all of the costs that are not directly related to the production of goods or services. These costs include marketing, sales, research and development, and general and administrative costs.

The formula for calculating SG&A is as follows:

**SG&A = Marketing Expenses + Sales Expenses + Research and Development Expenses + General and Administrative Expenses**

**Example**

A company has the following expenses:

* Marketing expenses: \$100,000
* Sales expenses: \$50,000
* Research and development expenses: \$25,000
* General and administrative expenses: \$75,000

The company's SG&A expenses are \$250,000.

**Interpreting SG&A**

SG&A expenses are an important part of a company's financial statements. They can be used to compare a company's performance to its competitors and to identify areas where costs can be reduced.

A high SG&A ratio can indicate that a company is not operating efficiently. This could be due to a number of factors, such as excessive marketing costs, high sales commissions, or inefficient general and administrative costs.

A low SG&A ratio can indicate that a company is operating efficiently. This could be due to low marketing costs, low sales commissions, or efficient general and administrative costs.

**Conclusion**

Selling, general, and administrative expenses (SG&A) are the costs incurred by a company in order to conduct its business. These expenses include marketing, sales, research and development, and general and administrative costs. SG&A expenses are an important part of a company's financial statements and can be used to compare a company's performance to its competitors and to identify areas where costs can be reduced.

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