What are Operating Expenses?
Operating expenses are the costs that a company incurs in order to operate and maintain its business. These expenses are typically recurring in nature and are necessary for the day-to-day operation of the business.
Operating expenses can include a wide variety of costs, such as:
- Salaries and wages: Costs associated with hiring and paying employees
- Rent and utilities: Costs associated with leasing and maintaining business premises
- Advertising and marketing: Costs associated with promoting the business and its products or services
- Legal and professional fees: Costs associated with legal and professional services, such as consulting and accounting
- Travel and entertainment: Costs associated with business-related travel and entertainment
Operating expenses are typically distinct from capital expenses, which are costs associated with the purchase of assets that have a useful life of more than one year. Capital expenses are typically larger in nature and are not incurred on a regular basis.
Understanding and managing operating expenses is an important aspect of financial management for businesses of all sizes. By carefully tracking and controlling operating expenses, a company can improve its profitability and financial performance.