What are operating expenses?

Operating expenses refer to the ongoing costs associated with the day-to-day functioning of a business. These expenses are essential for maintaining operations and can include costs such as rent, utilities, salaries, and materials needed for production. They are generally recurring and represent the necessary spending a business incurs to operate effectively.

This understanding differentiates operating expenses from one-time costs that may arise from starting a business, which are not considered ongoing. Additionally, while investments in capital assets pertain to expenditures for long-term assets like machinery or property, they do not fall under the category of operational costs incurred on a regular basis. Profits made from sales, on the other hand, relate to revenue generated by the business rather than expenses. Thus, the definition provided aligns well with the nature of operating expenses in the context of managing small business finances.