Short definition: Operating expenses (OPEX) are the ongoing costs incurred by a company in its day-to-day business operations.
Explanation: These expenses are necessary to run the business and generate revenue. They include salaries and wages, rent, utilities, marketing and advertising expenses, research and development costs, and other general and administrative expenses. Operating expenses are distinct from cost of goods sold (COGS), which are directly related to the production or purchase of goods.
Example: For a retail store, operating expenses would include rent for the store space, salaries for employees, utility bills, advertising costs, and office supplies.
Additional information (optional): Operating expenses are reported on the income statement and are subtracted from revenue to calculate operating income. They are a key factor in assessing a company’s profitability and efficiency.