Which of the following terms refers to ongoing costs necessary to operate a business?

Which of the following terms refers to ongoing costs necessary to operate a business?

• A. Capital Expenditures
• B. Marginal Costs
• C. Operating Expenses
• D. Fixed Revenues

Answer: (C)

Operating expenses are the ongoing costs that a business incurs to run its daily activities. These expenses include items such as rent, utilities, salaries, and other costs that are essential for maintaining operations. Unlike capital expenditures, which refer to expenses associated with acquiring or upgrading physical assets like property, equipment, or buildings, operating expenses are immediately expensed within the accounting period they occur in. Understanding operating expenses is crucial for assessing a business's profitability, as they directly impact the operating income calculation. This clarity helps managers and stakeholders evaluate financial performance over time and make informed decisions regarding budgeting and resource allocation.

Operating expenses are the ongoing costs that a business incurs to run its daily activities. These expenses include items such as rent, utilities, salaries, and other costs that are essential for maintaining operations. Unlike capital expenditures, which refer to expenses associated with acquiring or upgrading physical assets like property, equipment, or buildings, operating expenses are immediately expensed within the accounting period they occur in.

Understanding operating expenses is crucial for assessing a business's profitability, as they directly impact the operating income calculation. This clarity helps managers and stakeholders evaluate financial performance over time and make informed decisions regarding budgeting and resource allocation.