Examples of Operating Expense in the following topics:
-
- Operating expenses and non operating expenses are deducted from revenue to yield net income.
- An operating expense is the ongoing cost of running a product, business, or system.
- Paper, toner, power, and maintenance costs represent operating expenses.
- In business, operating expenses are day-to-day expenses such as sales and administration.
- Operating expenses, non operating expenses and net income are three key areas of the income statement.
-
- In business, net income also referred to as the bottom line, net profit, or net earnings is an entity's income minus expenses for an accounting period.
- It is computed as the residual of all revenues and gains over all expenses and losses for the period.
- The operating ratio is a financial term defined as a company's operating expenses as a percentage of revenue.
- The operating ratio can be used to determine the efficiency of a company's management by comparing operating expenses to net sales.
- It is calculated by dividing the operating expenses by the net sales.
-
- Operating expenses reported during the period were $85,000, but accounts payable increased during the period by $5,000.
- Expenses with no cash outflows are added back to net income (depreciation and/or amortization expense are the only operating items that have no effect on cash flows in the period);
- So, depreciation expense is shown (or captioned) on the statement of cash flows.
- Operating expenses reported during the period were $85,000, but accounts payable increased during the period by $5,000.
- Therefore, cash operating expenses were only $80,000.
-
- Net income (or Net profit) = Operating profit – taxes – interest
- These costs are treated as an expense during the period in which the business recognizes income from sale of the goods.
-
- Selling, General, and Administrative expenses (SG&A or SGA) consist of the combined payroll costs.
- Selling expenses represent expenses needed to sell products (e.g., salaries of sales people, commissions and travel expenses, advertising, freight, shipping, depreciation of sales store buildings and equipment, etc.).
- Research & Development (R&D) expenses represent expenses included in research and development.
- Other expenses or losses not related to primary business operations (e.g., foreign exchange loss).
- Finance costs are costs of borrowing from various creditors (e.g., interest expenses, bank charges).
-
- The income statement shows revenues and expenses for a specific period.
- Net income is what is left after all the revenues and expenses have been accounted for, it is also known as "Net Profit. "
- It then calculates operating expenses and, when deducted from the gross profit, yields income from operations.
- Adding to income from operations is the difference of other revenues and other expenses.
- Operating income occurs from any activity that is a direct result of its primary business, such as sales of goods and services.
-
- Profitability is measured by comparing the revenues earned with the expenses incurred to produce the revenue.
- Expenses are the costs involved in producing revenue, such as cash spent to purchase materials or pay bills or employees.
- If the revenues for a period exceed the expenses for the same period, net income results (Net income = Revenues – Expenses).
- If expenses exceed revenues for the period, then the result is a net loss.
- This matching of expenses and revenues is necessary for the income statement to present an accurate picture of the profitability of a business.
-
- Times Interest Earned Ratio = Earnings before Interest and Taxes (EBIT) / Interest Expense.
- Analysts often use "Operating Income" as a proxy for EBIT when complex accounting situations, such as discontinued operations, changes in accounting principle, extraordinary items, etc., are reported in a company's financial statements.
- EBITDA can be calculated by adding back Depreciation and Amortization expenses to EBIT.
-
- Also, the actual amount of tax liability due to the IRS may not be the same as the income tax expense reported on the income statement.
- Permanent difference: Due to generally accepted accounting principles treating items such as income and expenses differently than the IRS, the difference may never reverse.
- This method seeks to properly match expenses with revenues in the period the temporary difference originated.
- Federal income tax law, a net operating loss (NOL) occurs when certain tax-deductible expenses exceed taxable revenues for a taxable year.
-
- You add seven because the inventory increased, and you add fifteen because the accounts payable decreased, which means more money was paid.The cash paid for interest is determined by the bond interest expense and discount on the bonds payable.
- For example, if the interest expense is ten dollars, and the unamortized discount decreases by three dollars, then the cash paid for interest is seven dollars.
- The direct method for calculating this flow involves deducting from cash sales only those operating expenses that consumed cash.
- Once the cash inflows and outflows from operating activities are calculated, they are added together in the "Operating Activities" section of the cash flow statement to obtain the net cash flow for a company's operating activities.