Operating Loss (OL)

An operating loss occurs when a company’s operating expenses exceed gross profits (or revenues in the case of a service-oriented company, generally speaking, instead of a manufacturer). An operating loss does not consider the effects of interest income, interest expense, extraordinary gains or losses, income or losses from equity investments or taxes. These items are ‘below the line,’ meaning they are added or subtracted after the operating loss (or income, if positive) to arrive at net income. If there is an operating loss, there is usually a net income loss unless an extraordinary gain (e.g., sale of an asset) was recorded during the accounting period.