Operating Expense for Dummies
noun
What does Operating Expense really mean?
Operating Expense is a term used in business to refer to the costs or expenditures that a company incurs as part of its day-to-day operations in order to generate revenue. Imagine you have a lemonade stand, and every day you have to buy lemons, sugar, cups, and ice. These are all expenses that you need to cover in order to sell lemonade. These expenses are considered operating expenses because they are directly related to the operation of your lemonade stand.
In simpler terms, operating expenses are the regular costs a business has to pay to keep running, such as rent for a store, electricity bills, wages or salaries for employees, and supplies needed to produce goods or provide services to customers. Just like you need to buy lemons and sugar for your lemonade stand, a company needs to allocate money for rent, utilities, and employee salaries to keep its doors open and deliver its products or services to customers.
Let's think about it in another way. Imagine you have a pet dog that requires certain regular expenses. You have to provide food, water, and maybe some toys to keep your furry friend happy and healthy. These expenses are like the operating expenses for your dog. If you neglect to provide these things, your pet might get sick or unhappy, just like a business could struggle if it doesn't cover its operating expenses.
Now, sometimes businesses have different types of expenses. For example, they may have operating expenses and non-operating expenses. Operating expenses are those that are directly related to the daily operation of the business, while non-operating expenses are not directly connected to the core activities of the business. Non-operating expenses could include things like interest on loans or taxes paid to the government. However, for now, let's focus on operating expenses as the costs needed to keep the business running.
In summary, operating expenses are the regular costs a business needs to pay for things like rent, utilities, and employee wages in order to keep operating smoothly. Just like you need to buy lemons and sugar for your lemonade stand or provide food and water for your pet dog, a company has to spend money on these essential things to run its business and bring in revenue.
Revised and Fact checked by Michael Garcia on 2023-10-29 14:42:29
Operating Expense In a sentece
Learn how to use Operating Expense inside a sentece
- When a company pays for the electricity used to keep their machines running, it is considered an operating expense.
- If a restaurant buys ingredients to make meals for their customers, the cost of those ingredients is an operating expense.
- When a store pays rent for its building or office space, that cost is counted as an operating expense.
- If a company hires employees and pays them salaries, those salaries are considered operating expenses.
- The money spent on advertising and marketing campaigns to promote a product or service is an example of operating expenses.
Operating Expense Synonyms
Words that can be interchanged for the original word in the same context.
Operating Expense Hypernyms
Words that are more generic than the original word.
Operating Expense Holonyms
The larger whole to which this word belongs.
Operating Expense Category
The domain category to which the original word belongs.