Investigating of the Impact of Selling, General, and Administrative Costs Behavior on Future Profitability

In the fundamental analysis, it is claimed that an increase in the ratio of selling, general, and administrative costs to sales (SG&A) represents management inefficiency in controlling costs and could be interpreted as negative signal about future profitability. This ignores some important aspec...

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Autores principales:	Hamid Haghighat, Seyyed Morteza Mortazavi
Formato:	article
Lenguaje:	FA
Publicado:	Shahid Bahonar University of Kerman 2014
Materias:	fundamental analysis cost behavior fixed costs sticky costs Accounting. Bookkeeping HF5601-5689
Acceso en línea:	https://doaj.org/article/c3edc8ad3b1449b49995b355e5ffaeb2
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spelling	oai:doaj.org-article:c3edc8ad3b1449b49995b355e5ffaeb22021-11-04T19:47:20ZInvestigating of the Impact of Selling, General, and Administrative Costs Behavior on Future Profitability2008-89142476-292X10.22103/jak.2014.857https://doaj.org/article/c3edc8ad3b1449b49995b355e5ffaeb22014-12-01T00:00:00Zhttps://jak.uk.ac.ir/article_857_c1c039d811a50978ba552bb725bd6cd6.pdfhttps://doaj.org/toc/2008-8914https://doaj.org/toc/2476-292XIn the fundamental analysis, it is claimed that an increase in the ratio of selling, general, and administrative costs to sales (SG&A) represents management inefficiency in controlling costs and could be interpreted as negative signal about future profitability. This ignores some important aspects of SG&A cost behavior since both unchanged and sticky costs may cause the ratio of SG&A costs to sales increase. In this case, an increase in the SG&A cost ratio may actually convey positive information about managers’ expectations about future earnings. In this research, the impact of cost behavior on the relationship between future profitability and SG&A ratio was examined, using a sample of 137 firms during 1380 to 1389. The findings show that there is a negative relationship between future earnings and SG&A cost ratio in sales-increasing periods. But, inconsistent with traditional interpretation of SG&A cost changes, future earnings are positively related to changes in the SG&A cost ratio in the periods in which sales decline, and that the higher the SG&A cost ratio, the stronger the positive relationship between future earnings and SG&A cost ratio. Also, it was found that after eliminating the impact of cost behavior, the increase in SG&A cost ratio causes increase in the future earnings in both revenue-increasing and revenue-decreasing periods.Hamid HaghighatSeyyed Morteza MortazaviShahid Bahonar University of Kermanarticlefundamental analysiscost behaviorfixed costssticky costsAccounting. BookkeepingHF5601-5689FAمجله دانش حسابداری, Vol 5, Iss 18, Pp 7-24 (2014)
institution	DOAJ
collection	DOAJ
language	FA
topic	fundamental analysis cost behavior fixed costs sticky costs Accounting. Bookkeeping HF5601-5689
spellingShingle	fundamental analysis cost behavior fixed costs sticky costs Accounting. Bookkeeping HF5601-5689 Hamid Haghighat Seyyed Morteza Mortazavi Investigating of the Impact of Selling, General, and Administrative Costs Behavior on Future Profitability
description	In the fundamental analysis, it is claimed that an increase in the ratio of selling, general, and administrative costs to sales (SG&A) represents management inefficiency in controlling costs and could be interpreted as negative signal about future profitability. This ignores some important aspects of SG&A cost behavior since both unchanged and sticky costs may cause the ratio of SG&A costs to sales increase. In this case, an increase in the SG&A cost ratio may actually convey positive information about managers’ expectations about future earnings. In this research, the impact of cost behavior on the relationship between future profitability and SG&A ratio was examined, using a sample of 137 firms during 1380 to 1389. The findings show that there is a negative relationship between future earnings and SG&A cost ratio in sales-increasing periods. But, inconsistent with traditional interpretation of SG&A cost changes, future earnings are positively related to changes in the SG&A cost ratio in the periods in which sales decline, and that the higher the SG&A cost ratio, the stronger the positive relationship between future earnings and SG&A cost ratio. Also, it was found that after eliminating the impact of cost behavior, the increase in SG&A cost ratio causes increase in the future earnings in both revenue-increasing and revenue-decreasing periods.
format	article
author	Hamid Haghighat Seyyed Morteza Mortazavi
author_facet	Hamid Haghighat Seyyed Morteza Mortazavi
author_sort	Hamid Haghighat
title	Investigating of the Impact of Selling, General, and Administrative Costs Behavior on Future Profitability
title_short	Investigating of the Impact of Selling, General, and Administrative Costs Behavior on Future Profitability
title_full	Investigating of the Impact of Selling, General, and Administrative Costs Behavior on Future Profitability
title_fullStr	Investigating of the Impact of Selling, General, and Administrative Costs Behavior on Future Profitability
title_full_unstemmed	Investigating of the Impact of Selling, General, and Administrative Costs Behavior on Future Profitability
title_sort	investigating of the impact of selling, general, and administrative costs behavior on future profitability
publisher	Shahid Bahonar University of Kerman
publishDate	2014
url	https://doaj.org/article/c3edc8ad3b1449b49995b355e5ffaeb2
work_keys_str_mv	AT hamidhaghighat investigatingoftheimpactofsellinggeneralandadministrativecostsbehavioronfutureprofitability AT seyyedmortezamortazavi investigatingoftheimpactofsellinggeneralandadministrativecostsbehavioronfutureprofitability
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Investigating of the Impact of Selling, General, and Administrative Costs Behavior on Future Profitability

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