Another name for bad operating expenses is “unnecessary bureaucracy.” Also “lard.” You can probably come up with others. Good operating expenses make your business strong, and bad operating expenses drag down your bottom line and prevent you from taking advantage of business opportunities. They are both subtracted from your business’ total sales figures. COGS vs expenses are two different concepts even though they might appear to be the same on the surface. Good cholesterol makes you healthy, while bad cholesterol clogs your arteries. Operating expenses and cost of goods sold are two different expenses that occur in your daily business operations. You can think of operating expenses as the cholesterol in a business. (Excerpts from Financial Intelligence, Chapter 8 – Costs and Expenses) In this sample income statement, you can see how operating expenses are deducted from revenues and affect profit. Sign up for our online financial statement training and get the income statement training you need. Both operating expenses and COGS are expenditures to run a business, but they are listed separately on the income statement. In this case, the COGS is 300, while the expenses amount to 500. Another category of operating expense is selling, general, and administrative expenses (SG&A). It includes all the costs directly involved in producing a product or delivering a service. For example in a pizza shop, the dough and toppings (sauce, cheese, pepperoni, etc.) are the COGS related to selling the. Operating Expenses What is it The Cost Of Goods Sold (COGS) is the measure of direct costs incurred by a company to manufacture or deliver their product or service. Cost of goods sold refers to expenses directly related to the production. Operating expenses refer to expenditures that are not directly tied to the production of goods or services, such as rent, utilities, office supplies, and legal costs. COGS is an expense that is incurred because a sale takes place. Operating expenses (OPEX) and cost of goods sold (COGS) are discrete expenditures incurred by businesses. If you had no sales, you would basically have no COGS. It also includes management and staff salaries… plus everything else that the accountants have decided does not belong in COGS. Cost of goods sold or cost of services (also known as COGS and COS) is one category of business expenses. While the COGS (cost of goods sold) and OE (operating expenses) are both expenses but they are different. Operating expenses can also be referred to as SG&A (sales, general and administrative expenses) and are often thought of and referred to as “overhead.” The category includes items such as rent, utilities, telephone, research, and marketing. Operating expenses are listed on the income statement and, along with other costs, are subtracted from revenue to determine profit. Operating expenses are the costs that are required to keep the business going day to day (as opposed to expenses that are directly related to manufacturing a product or delivering a service – those are a different type of expense).
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |