where are selling and administrative expenses found on the multiple-step income statement? This is a topic that many people are looking for. khurak.net is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, khurak.net would like to introduce to you Selling, General, & Administrative Expenses (SG&A) on the Income Statement. Following along are instructions in the video below:
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Please refer. A friend today. We going to be looking at the selling general and administrative expenses or also known as the sg and a as we do in each one of these fundamental analysis. Tutorial videos.
I ll give you the actual definition and then we ll look at some examples and give you a little more insight. There sgna is a major non production cost reported on the income statement. It is the sum of all direct and indirect selling expenses and all general and administrative expenses of a company. Sga are usually recurring cost and they do not generally include one time costs direct selling expenses are expenses that can be directly linked to the sale of a specific unit such as an advertising expense indirect selling expenses are expenses.
Which cannot be directly linked to the sale of a specific unit. Which are proportionately allocated to all units to solve. During a certain period..
Such as telephone electric and postal charges general and administrative expenses include salaries of non sales personnel which would be like management and also items such as rent heat travel cost etc and every company is going to have different items in their okay. Now i m on the yahoo finance page. I m looking at the income statement. That s where you re going to find this particular bit of information selling general administrative expense right there under the operating expense category.
And like i said you can find this anywhere on yahoo finance. You can find on google finance. You can find your discount brokers you can find the income statement. In your company s annual report support and so on so this is information you re going to definitely want to understand and review.
Every time then new data comes out whatever you re looking at selling general administrative. Like i said every different company is going to have different items in their same categories. But varying amounts and they re all going to be completely different for one another and you don t want to take just the number itself and then go compare to another number. And say okay.
This one s got eighteen point. One and then find another one it s got seventeen point. Three..
So that obviously would be better. Know that obviously wouldn t be better. What you want to do instead of looking at just a number is actually look at the number compared to the gross profit and do the math there and get the percentage. When you take this number here and divide.
It by this number here in this particular case at coca cola right now you they re gonna typically run in the 60 range the 65 anywhere in that range that s a percentage of their gross profit is going out to sell selling general and administrative expenses. And that s actually kind of high you know anything under 30 percent. Is considered fantastic. So when you re looking at that.
And you said well an accounting. Anything under 30 percent. Is considered great well this guy s way over that yeah. But this guy s also a great company.
We know that for many different reasons. Warren buffett buys. It loves it and you re consistently making money the reality..
There is cuz they re consistently making money and that s the difference. When you re looking at this one is being consistently about sixty sixty five percent of the gross profit going out and selling general administrative. That s fine when you have a company that has a situation like a ford motor company that would have a selling general administrative expenses to be much higher. But they re their group they re percentage of the gross profit would also be very sporadic for example.
If ford motor company would have a recession. They would all a sudden you d see they re gross. They re selling general administrative expenses has become a as a percent of gross profit become something like a five hundred percent of that because they basically didn t make any money and they re bleeding red and you don t want to see that anything that s wildly fluctuating all of a place you know one great year. There they re looking at forty percent and then you know probably would never be it a little bit then the next year they re looking at you know it s three hundred percent of gross profit.
So there s something there that you want a boy and that s a company that is not consistently profitable basically that selling general administrative. That s how you would compare them against individual. Companies not the number itself not looking at just the 181. But you re actually looking that the percentage of gross profit.
Now you can look at and compare those two and get a more realistic comparison between individual companies even different industries. Because what you re really looking for is how do they compare to their gross profit is that gross profit stable consistent and if it is can it support the so in general and administrative costs. One last item..
I d like to note anytime. That you re looking at a selling general and administrative expense. That is eighty percent to a hundred percent of the gross profit margin. You re probably looking at a highly competitive company.
And you d want to just steer clear of that particular scenario. They don t have that at moat of that benefit to the company that s going to allow it to be really successful and profitable for an investor over the long term now you know please take a moment to review our disclaimer. The information provided here it is our opinion. Only under no circumstances do any statements here represent a recommendation to buy or sell securities or make any kind of an investment.
You are responsible for your own due diligence to summarize. We do not provide investment advice. Nor do we make any claims or promises that any information here will lead to a profit loss or any other result these videos. ” .
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