Operational costs refer to the expenses that a business incurs during its normal functioning. These costs include items such as salaries, rent, utilities, and materials needed for production. Understanding these costs is essential for businesses to maintain profitability and ensure efficient operations. Managing operational costs effectively can help a company improve its financial health. By analyzing expenses, businesses can identify areas where they can cut costs or optimize resources. This can lead to increased efficiency and better allocation of funds, ultimately contributing to the overall success of the organization.