A company's expenses are how much a company is spending before its net income. This is a useful metric to compare a company spending habits over time. Starting from the income statement, a company may have a considerable amount of revenues. As an investor goes down the Income Statement, gradually line items such as
Cost of Goods Sold,
Research and Development,
Selling, General & Admin,
and other Expenses
will be subtracted from Revenues. After the aforementioned expenses have been subtracted, we are now at EBIT.
will be subtracted from EBIT to achieve Net Income. We've summed the expenses for you to better understand how much a company is spending from its revenues before it hits net income, "the bottom line".
Bear in mind, increasing expenses are not necessarily a bad thing. If a company's revenues are increasing, there is an almost certain likelihood that expenses are increasing (think of the phrase "it takes money to make money"). These costs are attributable to the costs of the goods sold of a manufacturer. Situations where revenues are not increasing but expenses are rapidly increasing can be a red flag, signaling potential issues at a company. This metric is often used to compare a specific company over time. Using expenses to compare against competitors can be tricky and not as useful.
Total Expenses = Total Revenues (Quarterly) - Net Income (Quarterly)