General and Administrative Expense
Overhead Costs Essential to Running the Overall Business
General and Administrative Expense (G&A) represents the overhead costs required to manage and support a company's overall operations that are not directly tied to production, sales, marketing, or research activities. These expenses include executive salaries, finance and HR staff compensation, office rent (pre-lease capitalization), legal and professional fees, insurance, IT infrastructure, and corporate governance costs. G&A is a core component of operating expenses and is considered largely fixed in nature, making it a key focus for cost control and operating leverage analysis. Efficient G&A management contributes to higher operating margins as revenue scales.
What is General and Administrative Expense?
General and Administrative Expense (G&A) covers the central support functions and overhead necessary to operate the company as a whole. It is distinct from variable costs in cost of revenue or growth-oriented selling/marketing expenses.
G&A is classified as an operating expense under US GAAP and IFRS and is deducted in arriving at operating income. It tends to be more fixed than variable, providing operating leverage as revenue grows (G&A as % of revenue declines).
High G&A relative to peers may indicate inefficiency; low G&A can reflect scale or lean operations.
Common Components of G&A
Typical items included in General and Administrative Expense:
Key Categories
- Executive and corporate salaries/benefits (CEO, CFO, board)
- Finance, HR, IT, and legal staff compensation
- Office rent and facilities (pre-ASC 842; now partially capitalized)
- Professional fees (audit, legal, consulting)
- Insurance (D&O, general liability)
- IT infrastructure (servers, software licenses, cybersecurity)
- Corporate governance (board fees, shareholder relations)
- Office supplies and utilities
- Property taxes on administrative assets
Some companies break out stock-based compensation or restructuring here.
How G&A Fits in the Income Statement
Standard structure within operating expenses:
G&A reduces operating income; trends as % of revenue show overhead efficiency.
Tip: Mature companies target declining G&A %; startups have higher % during build-out.
Examples
Example 1: Large Tech Company
Example 2: Mid-Size Manufacturer
Software firms often <10%; retail/hospitality can exceed 15%.
Importance in Financial Analysis
G&A analysis reveals: - Operating leverage: Falling % = scalable model - Cost discipline: Flat absolute G&A during growth = efficiency - Overhead burden: High % pressures margins - Corporate maturity: Startups high, mature low
Benchmark G&A / Revenue and G&A growth vs. revenue growth. Sudden spikes may signal legal issues or expansion.
Warning: Hidden costs (e.g., stock comp) sometimes buried in G&A—review footnotes.
Key Takeaways
General & Administrative Expense covers central overhead and support functions.
Includes executive pay, legal, IT, insurance, facilities—largely fixed costs.
Reduces operating income; declining % of revenue signals scale leverage.
Benchmark vs. peers for efficiency; monitor absolute growth control.
Essential for sustainable margin expansion as companies mature.
General and Administrative Expense
Overhead Costs Essential to Running the Overall Business
General and Administrative Expense (G&A) represents the overhead costs required to manage and support a company's overall operations that are not directly tied to production, sales, marketing, or research activities. These expenses include executive salaries, finance and HR staff compensation, office rent (pre-lease capitalization), legal and professional fees, insurance, IT infrastructure, and corporate governance costs. G&A is a core component of operating expenses and is considered largely fixed in nature, making it a key focus for cost control and operating leverage analysis. Efficient G&A management contributes to higher operating margins as revenue scales.
Table of Contents
What is General and Administrative Expense?
General and Administrative Expense (G&A) covers the central support functions and overhead necessary to operate the company as a whole. It is distinct from variable costs in cost of revenue or growth-oriented selling/marketing expenses.
G&A is classified as an operating expense under US GAAP and IFRS and is deducted in arriving at operating income. It tends to be more fixed than variable, providing operating leverage as revenue grows (G&A as % of revenue declines).
High G&A relative to peers may indicate inefficiency; low G&A can reflect scale or lean operations.
Common Components of G&A
Typical items included in General and Administrative Expense:
Key Categories
- Executive and corporate salaries/benefits (CEO, CFO, board)
- Finance, HR, IT, and legal staff compensation
- Office rent and facilities (pre-ASC 842; now partially capitalized)
- Professional fees (audit, legal, consulting)
- Insurance (D&O, general liability)
- IT infrastructure (servers, software licenses, cybersecurity)
- Corporate governance (board fees, shareholder relations)
- Office supplies and utilities
- Property taxes on administrative assets
Some companies break out stock-based compensation or restructuring here.
How G&A Fits in the Income Statement
Standard structure within operating expenses:
G&A reduces operating income; trends as % of revenue show overhead efficiency.
Tip: Mature companies target declining G&A %; startups have higher % during build-out.
Examples
Example 1: Large Tech Company
Example 2: Mid-Size Manufacturer
Software firms often <10%; retail/hospitality can exceed 15%.
Importance in Financial Analysis
G&A analysis reveals: - Operating leverage: Falling % = scalable model - Cost discipline: Flat absolute G&A during growth = efficiency - Overhead burden: High % pressures margins - Corporate maturity: Startups high, mature low
Benchmark G&A / Revenue and G&A growth vs. revenue growth. Sudden spikes may signal legal issues or expansion.
Warning: Hidden costs (e.g., stock comp) sometimes buried in G&A—review footnotes.
Key Takeaways
General & Administrative Expense covers central overhead and support functions.
Includes executive pay, legal, IT, insurance, facilities—largely fixed costs.
Reduces operating income; declining % of revenue signals scale leverage.
Benchmark vs. peers for efficiency; monitor absolute growth control.
Essential for sustainable margin expansion as companies mature.
Related Terms
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