Operating Expense
A category of expenditure that a business incurs as a result of performing its normal business operations. One of the typical responsibilities that management must contend with is determining how low operating expenses can be reduced without significantly affecting the firm's ability to compete with its competitors.
Also known as "OPEX" Investopedia Says:
For example, the payment of employees' wages and funds allocated toward research and development are operating expenses. In the absence of raising prices or finding new markets or product channels in order to raise profits, some businesses attempt to increase the bottom line purely by cutting expenses.
While laying off employees and reducing product quality can initially boost earnings and may even be necessary in cases where a company has lost its competitiveness, there are only so many operating expenses that management can cut before the quality of business operations is damaged. Related Terms:
Acquired Fund Fees And Expeses - AFFE
Berry Ratio
Capacity Utilization Rate
Expense Ratio
Expenses
Non-Operating Cash Flows
Operating Income
Operating Margin
Operating Profit |