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Definition of 'Overhead'

Overhead is a general term for the ongoing costs of running a business. It includes expenses such as rent, salaries, utilities, and marketing. Overhead can be fixed or variable. Fixed overhead costs are the same regardless of how much business you do, such as rent and salaries. Variable overhead costs vary depending on how much business you do, such as the cost of materials and supplies.

Overhead is important to understand because it can have a big impact on your bottom line. If your overhead is too high, you may not be able to make a profit. On the other hand, if your overhead is too low, you may not be able to provide the level of service that your customers expect.

There are a few things you can do to control your overhead costs. First, you can negotiate with your vendors to get the best possible prices on goods and services. Second, you can look for ways to reduce your energy consumption. Third, you can use technology to automate tasks that would otherwise be done by employees.

By carefully managing your overhead costs, you can improve your profitability and increase your bottom line.

In addition to the costs mentioned above, overhead can also include depreciation, interest, and taxes. Depreciation is the gradual decrease in value of an asset over time. Interest is the cost of borrowing money. Taxes are the government fees that businesses must pay.

It is important to understand all of the different types of overhead costs so that you can accurately budget for them. Overhead costs can be a significant expense, so it is important to find ways to control them.

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