Business of Radiology 101
Income Statement: Expenses
Expenses are the costs incurred in producing a product or service during a defined time period. Costs and expenses are generally used synonymously and can be subdivided into several different categories including: cost of sales, operating expenses, non-operating expenses, depreciation, amortization and taxes. ‘Cost of Sales’ are expenses directly attributable to the manufacture of a product or production of a service. Operating Expenses encompasses the day-to-day expenses of the business, which keeps the infrastructure of the business functional. Businesses often have significant loans which require interest payments at regular intervals, contributing to Non-Operating Expense. Equipment purchased by a business steadily loses value over time, called Depreciation. Depreciation can be divided over the projected lifetime of the equipment as incremental expenses. The value of intangible (non-physical) items, such as the purchase of a patent, also declines in value over time in a similar process called Amortization. The final expense to be subtracted from revenues are taxes assessed by local, federal, and foreign governments which are applied against Earnings Before Taxes (EBT).