Operating expenses are subtracted from revenue for a service company and from gross profit for a merchandising company.

Operating Expenses

Regular costs incurred in the operation of a business, such as wages, utilities, and rent, excluding cost of goods sold.

Service Company

A business entity that provides services to individuals or other businesses, rather than producing goods.

Gross Profit

The financial metric calculated as sales revenue minus cost of goods sold (COGS), indicating the core profitability of a company's operations.