The AMA Handbook of Due Diligence

SECTION 24

OPERATING EXPENSES

Intr

oduction

The analysis of an entity’s operating expenses has two primary objectives:

•

To determine the recent trends in the major operating expense accounts as a guide to the underly-

ing factors that influence expense levels.

•

To establish guidelines for testing the reasonableness of the entity’s financial projections.

For the purpose of these analyses, the operating expenses have been divided into the traditional categories of

selling expenses and general and administrative expenses.

It is recognized that many companies combine these two categories into a single category of “selling, gener-

al and administrative expense,” ...