Definition:

Operating expenses are the cost of running a business (also known as OpEx). Examples include product costs, rent, salaries, marketing, insurance, etc. It does not include the capital costs of purchasing assets that are not for resale (like machinery or property).

Example:

For a gadget company, operating expenses includes the money that goes into paying for factory space, labor, and other general expenses of running a business.

Why it matters:

Controlling operating expenses is a core part of successfully managing a business. Growing staff or facilities too quickly can destroy a business, while not growing them fast enough can leave a company struggling to cope with demand, and missing out on opportunities.