It is the cost incurred in administering & maintaining a business on a day to day basis. It is the amount expended by a company just to maintain its existence.
Suppose Navya pays Rs.10,000 every month to the manager of each of the pizza outlet, Rs.2000 every month as cleaning charge of each outlet, and Rs.5000 towards other sundry expenses. The operating expense of her company is Rs.41,000 every month (10,000 * 3 + 2000 * 3 + 5000). The total operating expense during the quarter was Rs.1,23,000 (41,000 * 3).
Just like in case of cost of revenue, companies which are able to either maintain or decrease their operating costs in relation to their sales are better.
In case of industrial and utility companies operating expense is calculated as the sum of selling & general expenses, research & development cost, unusual expenses like restructuring charge & litigation expense and any other operating expense resulting due to foreign currency adjustment etc.
In case of insurance companies operating expense is calculated as the sum of selling & general expenses, unusual expenses like restructuring charge & litigation expense and any other operating expense resulting due to foreign currency adjustment etc.
In case of banks, loan loss provision is part of operating expense head. Loan loss provision refers to the provision created for possible default on loans given out by the bank.