Operating costs and conduct of business
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Operating costs are the total costs of providing goods or services, which include the costs of supplies and utilities, the repair and maintenance of assets, salaries, benefits, marketing costs, and depreciation of fixed capital.
The profitability of businesses providing a good or a service is affected on the one hand by policy impacting the cost of those essential inputs, on the other hand by policy that stimulates or discourages market demand for the good or service. Indeed, the marketing of certain products may be prohibited altogether as a consequence of legislation aimed for instance at the protection of consumers or of the environment.[1]
Experience shows also that new policies, e.g. aiming at higher product quality or safety standards, can lead to changes of company administration, and partly makes re-organisation necessary. In particular in the case of SME such additional burden can quickly exceed their financial capacity and has therefore to be carefully adapted, without impairing the policy objectives.
According to the Impact Assessment Guidelines of the European Commission, the following key questions are of particular importance when examining the impacts of policy initiatives on operating costs and conduct of business:
- Evaluating impacts on additional costs
- Evaluating impacts on essential inputs
- Evaluating impacts on assessibility of finance
- Evaluating impacts on the investment cycle
- Evaluating impacts on withdrawal of products
- Evaluating impacts on regulation
- Evaluating impacts on differential treatment of businesses[1]
See also
References
This text is for information only and is not designed to interpret or replace any reference documents. The text is partially adapted from:
Activities of the European Union: Enterprise policy