DECA Retail Merchandising Practice Exam

Operating expenses include which of the following categories?

1. Cash inflow from investing activities

2. Selling, general, and administrative expenses

3. Cost associated with inventory purchases

4. Fixed asset depreciation

The correct answer is: Selling, general, and administrative expenses

Operating expenses represent the costs associated with running a business's core operations on a daily basis. This category primarily includes selling, general, and administrative expenses, which encompass a variety of costs necessary for maintaining business functions that are not directly tied to producing goods or products. These expenses can involve salaries, utilities, rent, office supplies, and marketing costs, all of which are essential for the business's regular operation. By identifying selling, general, and administrative expenses as a part of operating expenses, it becomes clear why this choice fits the definition accurately. The other options listed pertain to different financial activities or classifications. Cash inflow from investing activities relates to the acquisition and disposal of long-term assets and is not categorized as an operating expense. Costs associated with inventory purchases, while a significant part of a company's expenses, are classified as cost of goods sold rather than operating expenses. Finally, fixed asset depreciation reflects the allocation of an asset's cost over its useful life and is also represented separately in financial statements. Thus, the focus on selling, general, and administrative expenses correctly identifies the nature of operating expenses.