Financial modelling terms explained

Selling, General, And Administrative Expenses

Selling, General, and Administrative expenses (SG&A) represent the operating expenses of a business that are not directly associated with production. Selling and administrative costs are marketing expenses, finance costs, and other general expenses that are necessary to keep the business running.

What Are Selling, General, And Administrative Expenses?

SG&A expenses are the costs a company incurs in order to sell its products and services. This includes marketing and advertising costs, as well as the costs of any sales personnel. It also includes general administrative costs, such as the costs of maintaining a corporate headquarters, paying for accounting and legal services, and providing employee benefits. SG&A expenses can be a significant expense for a company, and it is important to track them carefully in order to understand how they are impacting the company's profitability.

How Do You Calculate Selling, General, And Administrative Expenses?

The calculation of selling, general, and administrative expenses (SG&A) is a relatively straightforward process. The total amount of SG&A for a given period is the sum of all the individual expenses that comprise that category. There are a number of different types of SG&A expenses, but some of the most common ones include salaries and wages, advertising and marketing, office supplies, and rent.

To calculate any of these individual expenses, first determine the cost per unit. This is simply the cost of the good or service divided by the number of units produced or sold. Then, multiply this cost per unit by the number of units produced or sold. This will give you the total cost of that particular expense.

For example, if a company spends $1,000 on advertising and marketing in a given month, and they produce and sell 10,000 units in that month, the total cost of advertising and marketing would be $10,000.

What Are Some Examples of Selling, General, And Administrative Expenses?

SG&A expenses are those that are incurred in the course of normal business operations, but are not directly related to the production of a good or service. Some common examples of SG&A expenses include:

- Salaries and benefits for administrative staff

- Rent and utilities for office space

- Marketing and advertising expenses

- Professional fees, such as accounting or legal fees

- Travel and entertainment expenses

In order to ensure that a company's net income is as accurate as possible, it is important to accurately track and report SG&A expenses. This will help ensure that the company's bottom line is not unduly affected by these costs.

What's the Difference Between Selling, General, And Administrative Expenses and Operating Expenses?

The three categories of expenses that a company can incur are selling, general, and administrative (SG&A), and operating expenses (OPEX). SG&A expenses are costs that are directly related to the sales of a company's products or services. These costs can include advertising, marketing, and commissions. General and administrative expenses are costs that are not directly related to the sales of a company's products or services, but are instead related to the company's overall operations. These costs can include salaries, rent, and utilities. Operating expenses are the sum of both SG&A and general and administrative expenses.

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