Operating Expenses
Day-to-day costs of running a business excluding production costs, including selling, general, administrative, and research expenses needed to conduct operations.
Operating Expenses
The day-to-day costs of running a business that are not directly tied to production of goods or services, including selling, general and administrative (SG&A) expenses, research and development, and depreciation of non-production assets.
For example, a retail chain’s operating expenses might include $5 million in store employee salaries, $3 million in advertising and marketing, $4 million in rent for retail locations, $2 million in corporate office costs, and $1 million in depreciation of store fixtures.
Operating expenses appear on the income statement after cost of goods sold and are subtracted from gross profit to determine operating income. They represent the ongoing costs of conducting business operations, excluding costs directly attributed to production. Managing these expenses efficiently while maintaining necessary business functions is crucial for profitability, especially in industries with thin margins.