Chapter 11 — Operating expenses: Where Warren keeps a careful eye
Right beneath the line on the income statement for gross profit comes a group of expenses called operating expenses.
These are all the company’s hard costs associated with research and development of new products, selling and administrative costs of getting the product to market, depreciation and amortization, restructuring and impairment charges, and the catchall “other” that includes all non-operating, non-recurring expenses.
When these entries are added, they make up the company’s total operating expenses, which are then subtracted from the gross profit to give us the firm’s operating profit or loss. Since these entries all have an impact on the long-term economic nature of the business, it is best if we spend the next couple of chapters going through them one by one in true Warren fashion.
