Operating expenses: What are the firm’s operating expenses, and are they increasing
or decreasing? Operating expenses typically include the cost of marketing, technology, and administrative overhead. They also include, in accordance with professional
accounting standards (see below), stock-based compensation to employees and executives, amortization of goodwill and other intangibles, and impairment of investments.
In e-commerce companies, these turn out to be very important expenses. Many e-commerce firms compensated their employees with stock shares (or options), and many
e-commerce firms purchased other e-commerce firms as a part of their growth strategy.
Many of the companies were purchased at extremely high values using company stock
rather than cash; in numerous instances, the purchased companies fell dramatically
in market value. All these items are counted as normal operating expenses.