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Operating Expenses

What is Operating Expenses?

Operating Expenses are the expenditures that are not directly associated with the production of goods and services. For example: Sales & Marketing costs, Administrative salaries, Research & development costs, as well as any other non-direct costs, are classified as operating expenses.

Alternate names: Operational Expenditures, Non-Manufacturing Costs

How to calculate Operating Expenses

ƒ Sum(Operating Expenses)

Example

On the New Relic 2020 income statement, the operating expenses are: General and administrative: $99,284, Selling and Marketing expenses: $334,319, Research and development: $148,159. This gives us a total operating expense of $581,762.

More about this metric

Operating Expenses are critical to determining the operating income. One of the typical responsibilities that management must contend with is determining how to reduce operating expenses to be efficient without significantly affecting a firm's ability to compete with its competitors. However, it is inappropriate to draw the conclusion that the less is better without considering the overall situation. For example, if the company is in the growth stage, operating expenses could increase at a higher rate than revenue. Therefore, it is important to keep in mind while tracking Operating Expenses that the trend is relative to the stage of the business and the maturity of the product.

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