Operating expenses are the costs a business incurs to run its day-to-day operations. These expenses include items such as salaries, rent, utilities, and office supplies. They are essential for maintaining the business's functionality and are typically recorded on the income statement. These costs are distinct from capital expenditures, which are investments in long-term assets like equipment or buildings. Managing operating expenses effectively is crucial for a company's profitability, as they directly impact the bottom line. Keeping these expenses in check can help businesses improve their financial health and operational efficiency.