What do operating expenses generally include?

Operating expenses are the costs that a business incurs through its normal business operations. This encompasses a wide range of necessary expenditures that are essential for the day-to-day functioning of the business. Typical examples of operating expenses include rent, utilities, salaries and wages, depreciation, maintenance, advertising, and other costs associated with producing goods or providing services.

By identifying operating expenses as the costs related to running the business, it is clear that these are critical for assessing the financial performance of a company. These expenses do not include gains or losses from asset sales, taxes, or investment income, which are categorized differently on the income statement. Understanding which costs are operating expenses helps in analyzing profitability and operational efficiency, as they are directly tied to the core business activities.