What is Fixed Costs?

A definition of Fixed Costs

“Fixed costs are expenses that do not change with the level of goods or services a business produces. They remain constant regardless of business activity levels over a specified time period.”

Fixed Costs in Business Glossary - What is Fixed Costs?

Business Glossary > What is Fixed Costs?


Examples of Fixed Costs in a Sentence:

Rent is an example of a fixed cost for a business.

Companies must cover their fixed costs even if sales drop.

Understanding fixed costs is essential for managing business finances.

Why is Fixed Costs Important in Business?

Fixed costs are essential for financial planning as they impact pricing, budgeting, and profitability. Businesses must ensure their revenue covers these costs even during low production periods to remain financially stable.

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Associated Terms

Here are some associated business terms and synonyms for “Fixed Costs”:

  • Sunk Costs
  • Overhead Costs
  • Constant Costs

Company Example – Netflix

Netflix incurs fixed costs in its operations, such as the licensing fees for streaming content and server maintenance costs. These costs remain constant regardless of the number of subscribers or streaming hours, impacting overall budgeting and pricing strategies.

Final Notes on Fixed Costs

When business managers evaluate their financial planning, fixed costs must be considered to maintain profitability. Understanding and managing these are crucial for long-term financial viability in any company.


This has been a definition of Fixed Costs meaning.

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