An expense is a cost that a company incurs in order to generate revenue. Expenses are recorded on a company's income statement and are subtracted from its revenues to determine its net income.
Examples of expenses include the cost of raw materials, labor, utilities, advertising, rent, insurance, and taxes. Expenses are an important factor in a company's profitability, as they reduce the amount of revenue that is available as profit. Managing expenses is therefore a crucial part of financial management, as it can help a company to improve its profitability and maximize its value.
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