SG&A expenses

What it costs to sell the product and run the company

In detail

SG&A covers selling, general and administrative costs: advertising, salaries, rent, everything outside making the product. Subtract it from gross profit and you have operating profit. If sales grow but SG&A grows just as fast, operating profit stays flat. The more of it is fixed, the harder profit falls when sales drop.

Example

Taking $30 million of SG&A out of $40 million of gross profit leaves $10 million of operating profit.

Related terms

Gross profit Operating profit Operating margin

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