Operating Expenses

Definition - What does Operating Expenses mean?

Operating expenses are expenses that a business must pay in order to remain operating on a day-to-day basis. Operating expenses typically do not include production costs, one-time expenses or legal judgment costs. In terms of the law, operating expenses contribute to the calculating operating income, which is an important regulatory statistic for companies.

Justipedia explains Operating Expenses

The reason why operating expenses are important is because they let the company leaders know exactly how much money needs to be made in order to cover the daily costs. Operating expenses can include rent, transportation, employee benefits, payroll, taxes, commissions, etc. Companies often include operating income on their balance sheets. This information is a useful statistic for investors who are trying to decide if the company's stock is a good investment or not. This statistic also helps the company know whether or not it needs to lower its operating costs due to a lack of financial sustainability.

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