Operating expenses are the costs associated with running a business. They include both direct and indirect costs, such as salaries, rent, utilities, and other OVERHEAD costs. The term 'operating expenses' can be broken down into two parts: NUT, which stands for Necessary Unavoidable Expenses, and OVERHEAD, which stands for Ongoing Variable Expenses and Recurring Headcount Expenses. Together, these two terms make up the total operating expenses of a business.