On platforms like Dividend Data, you can find the Operating Expenses for various stocks. This is in the stock research tool.
Definition:
Operating Expenses are the costs required for a company to conduct its normal business operations. These include rent, utilities, salaries of non-production staff, marketing, and administrative expenses. Unlike the Cost of Goods Sold (COGS), Operating Expenses are not directly tied to the production of goods or services.
Types of Operating Expenses
Selling, General & Administrative Expenses (SG&A): Includes expenses like salaries, rent, office supplies, and advertising.
Research and Development (R&D): Costs related to the development of new products or services.
Depreciation and Amortization: The allocation of the cost of tangible and intangible assets over their useful lives.
Why are Operating Expenses Important?
Profitability Analysis: Operating Expenses directly impact a company's profitability. High OPEX can lower profits, whereas efficient management can improve them.
Budgeting and Cost Control: Analyzing Operating Expenses helps in budgeting and identifying areas for cost reduction.
Comparative Benchmarking: Allows investors to compare operational efficiency across companies within the same industry.
Operating Expenses in Financial Statements
Operating Expenses are detailed in the Income Statement and are subtracted from Gross Profit to calculate Operating Income (or Operating Profit).
Analyzing Operating Expenses
Expense Ratio: Comparing Operating Expenses to total revenue helps in assessing operational efficiency.
Trend Analysis: Changes in Operating Expenses over time can indicate shifts in business strategy or efficiency.
Industry Comparison: Some industries inherently have higher Operating Expenses due to their nature of business.
Operating Expenses vs. Capital Expenditures
It's important to distinguish Operating Expenses from Capital Expenditures (CAPEX). While OPEX represents the ongoing costs for running a business, CAPEX refers to major purchases or investments in assets that will provide benefits over a longer period.