Operating Expense
Ron explains it all in just 60-seconds.
So what is an operating expense analysis, really?
Operating expenses (abbreviated as OPEX by proud MBA’s) are the day-to-day costs of running your business: the stuff that keeps it going but not directly what you produce or you sell. Think rent, utilities, software, insurance, payroll, and that weird subscription you forgot to cancel.
These expenses show up on your income statement and get subtracted from revenue to figure out how profitable you actually are. BUT… they don’t include big expenses like buying equipment (that’s a capital expense.) They are all the things you pay for that keep you in business right now.
Smart businesses watch their operating expenses like a hawk - not just to save money, but to spot bloat before it kills their bottom line.
If you’re wondering where your money went, start with your operating expenses (it’s probably there ordering takeout and laughing at you.)
How people actually use it in a sentence...
“Sam finally looked at his operating expenses and realized he was paying for five different online platforms to keep him aware of that he was paying for five different platforms.”
Did you know...
Public companies report operating expenses on every quarterly earnings call — because Wall Street watches them like a hawk. High OPEX with low results usually means layoffs or cuts are coming.
It’s one of the cleanest ways to tell if a business is just big, or actually efficient.
Want the textbook definition? Check out Operating Expense on Investopedia.com