The 'Costs and Expenses' of a company refers to all the money a company spends to operate and run its business. It includes everything from the cost of materials and labor used to produce goods or services (Cost of Goods Sold or COGS), to the day-to-day operational costs such as rent, salaries, and utilities (Operating Expenses).
In greater detail, the 'Costs and Expenses' of a company are divided into two main categories: 'Cost of Goods Sold (COGS)' and 'Operating Expenses'. COGS is the direct costs attributable to the production of the goods or services sold by a company. These costs may include direct materials, direct labor, and direct overheads.
Operating expenses, on the other hand, include all indirect costs that a company incurs while performing its normal business operations. These can include rent, salaries, utilities, office supplies, legal costs, marketing and advertising costs, and depreciation or amortization of assets.
Both COGS and operating expenses play a significant role in determining a company's net income. It's important to note that lower costs and expenses typically equate to higher profits for a company, assuming revenue remains constant.
For Ford, costs include the direct costs of producing cars, such as materials and labor. Expenses include costs for research and development, marketing and advertising, administrative costs (like rent and salaries), and interest on loans.
Delta's costs include the direct costs of providing flight services, such as fuel and aircraft maintenance. Expenses include costs for marketing and sales, administrative costs (like salaries and office expenses), and depreciation of aircrafts and facilities.
For Amazon, costs include the direct costs of acquiring products for sale, like purchasing goods from suppliers. Expenses include advertising costs, delivery expenses, salaries, and costs associated with maintaining their website and warehouses.