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Finance: What are operating expenses? 2 Views

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Description:

A company has numerous operating expenses, but the primary ones have to do with payroll, sales and marketing, taxes and fees, office supplies, sometimes also including rents. Payroll is employee compensation, including incentive bonuses, pensions, medical insurance, etc. Sales and Marketing would include promotional costs, such as travel, trade shows, entertainment for clients, media printing, and advertising. Taxes, legal fees, accounting fees, insurance, and incidental repair fees, as well as office equipment and maintenance would also be a part of operating expenses. These are all cumulative costs that are subtracted from gross revenues in order to help calculate where the breakeven point is for the company to become profitable.

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Transcript

00:00
Finance allah shmoop what are operating expenses Well simply put
00:07
operating expenses are the expenses it takes to operate a
00:12
business Yeah in sort of big fat dog here but
00:15
why would they be called out separate from any other
00:18
expenses You know manish thana like what other expenses are

00:23
there anyway that aren't operating All right Well we'll noodle
00:28
the notion here for a moment Noodling noodling Well if
00:31
you are running a drone making plant while your operating
00:34
expenses are things like the cost of plastic molds for
00:39
the drone itself batteries computer chips for the brains of
00:42
the drone computer chips to communicate wirelessly with the controller
00:47
copter blades lights packing material labour to put all this
00:51
together and then they're shipping containers Don't forget shipping containers
00:54
The drones don't just fly to the customer way need
00:58
pretty ribbons on them anyway Never mind on that part
01:01
so all of the above our core operating expenses they're
01:05
part of what comprises the gross profits of the company
01:09
The revenue minus the cost actually make the product but
01:13
to fully operate the business you need to include a
01:16
ton of other things like paying for insurance rent for
01:21
ah building You need lawyers because they always need lawyers
01:25
and and there's secretaries and other bureaucrats Teo you know
01:29
do stuff run things Yeah well added up those operating
01:33
expenses when subtracted from revenues while they give you operating
01:38
profits or crete acts profits And there are other expenses
01:42
like capital expenses That is you spend one hundred million
01:45
box on a factory teo stamp out drones or whatever
01:49
And that cash is spent immediately upfront but factory last
01:53
twenty years So well you know what do you do
01:55
Well yeah You take five million a year to straight
01:58
lined appreciate factory too Zero after it's used up Well
02:01
you might also have acquired patents which are similarly written
02:06
down in value or advertised away as their value slowly
02:10
fades with time like shmoop writers So what's left Well
02:14
what comes after operating profits Well taxes on dividends and
02:18
a bunch of other crap like you know if the
02:20
company had invested in things that had to be written
02:23
up or down and other branham stuff it's all out
02:27
there after operating expenses But a key idea here is
02:30
that operating expenses are more or less Quote everything unquote
02:35
That it takes to run the business except taxes in
02:38
dividend obligations which aren't counted in this calculation So now
02:42
that you have a handle on what comprises operating expenses
02:46
well you too can be a no smooth operator Shod
02:50
a member Ask your parents in oh no she's a 00:02:53.33 --> [endTime] smooth operator
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