Selling, General & Administrative Expense-SG&A
Selling, General & Administrative Expense is a combined value of all selling, general and administrative expenses.
Selling expenses are divided into 2 categories: direct selling expenses and indirect selling expenses. Direct selling expenses can be directly linked to produced and sold product, like advertising or credit expenses. Indirect selling expenses are not linked to the process of selling, but must be allocated to all sold units. Telephone and postal charges are examples of indirect selling expenses.
General expenses are those expenses that are necessary for normal business operations. General expenses include lights, heat and rent.
Administrative expenses are expenses of administration, like payrolls of non-selling employees, managers travel expenses etc.
Selling, General & Administrative Expenses must be well controlled in order to keep efficient cash flow. Allegation of these costs as a percentage of some other value, like net income or sales, is a good way to compare cost-management policies of different companies in the same industry.
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