Skip to main content

Operational Expense

Operational Expense (Definition)​

An operational expense is the ongoing cost for running a product, business, or system.

Key aspects of operational expenses include:

  1. Also known as operating expenses or OPEX
  2. Include costs such as rent, utilities, salaries, and maintenance
  3. Recorded on the income statement and deducted from revenue to calculate operating profit
  4. Distinct from capital expenditures (CAPEX) which are longer-term investments
  5. Can be fixed (constant regardless of output) or variable (change with production levels)
  6. Critical for calculating break-even points and profit margins
  7. Understanding and managing operational expenses is crucial for maintaining profitability

Effective control of operational expenses is essential for improving business efficiency and maximizing profits.