What is a Fixed Cost? Definition or Meaning

They say death and taxes are the only guarantees in life. Well, in business, fixed costs are also one of those things you need to include as a near certainty. This is because fixed costs refer to expenses such as rent, electricity and some salaries. Typically, you would continue paying these costs even if the business went broke.

For example…

Take the video game retailer GamePlay. They pay monthly rent to lease the premises, electricity bill as well as professional liability insurance costs as some examples of their fixed costs. Now, if GamePlay went bankrupt for some unfortunate reason, they are still liable to pay all these fixed costs.