What are operating expenses?

Operating expenses are defined as the costs that a company incurs through its regular business activities, excluding the costs directly associated with producing goods or services, known as the cost of goods sold (COGS). These expenses include items such as rent, utilities, salaries, and other administrative costs necessary to maintain business operations. By focusing on normal operations, this definition emphasizes the ongoing nature of operating expenses as crucial to the day-to-day functioning of the business.

This choice specifically highlights that these expenses are integral to running the business, rather than being linked to financing, which is covered by different categories of expenses such as interest expenses. It also avoids any implication that operating expenses can be deferred or are only concerning one-time charges, which do not encompass the typical, recurring costs one might expect in operating a business.