Operating expenses are the costs that a business incurs while performing its normal operational activities. They are different from expenses relating to investing in projects and borrowing. Operating expenses are the ongoing costs incurred by a business to maintain day-to-day operations and generate revenue. They are essential for the continued operation of a business and are typically incurred within a short time period. Operating expenses are reflected on a companys income statement.

Examples of operating expenses include rent, equipment, inventory costs, marketing, payroll, insurance, step costs, and funds allocated for research and development. Operating expenses can differ according to what a company does. Some activities (and expenses) might be considered operational in one industry but not so in another.

Operating expenses are commonly referred to as overhead and represent indirect or fixed costs. They are indirect because they are not directly associated with the production or sale of goods and services. Because operating costs are fixed, they tend not to fluctuate with the volume of sales.

In summary, operating expenses are the costs of running a business and may include costs such as rent, utilities, marketing, and payroll. They are essential for the continued operation of a business and are typically incurred within a short time period.