Operating Expenses (Opex) are received during the day-to-day operations of an organization. They are “necessary and mandatory” expenses for any company. These expenditures include rent, payroll, equipment purchases, insurance plans, etc. Attempting to reduce operational expenses is risky and can entail negative consequences for the organization, since Operating Expenses involve all mandatory expenses.

Opex should not be confused with Capex, also known as Capital Expenses. Capex incorporates all costs related to investments/upgrades. Any new asset or upgraded asset (be it tangible or intangible) purchased by a company will be included in the Capex. For instance, real estate, equipment, furniture, are tangible assets. On the other hand, intangible assets are patents, license agreements, copyrights, etc. Although Capex will significantly help generate greater revenue, it is not an essential expense. Unlike Capex, Operating Expenses are a necessity for the survival of an organisation: without a payroll, there will be no employees to put in the required work.

References:

• https://www.investopedia.com/terms/o/operating_expense.asp