Operating loss definition — AccountingTools

What is an Operating Loss?

An operating loss is the loss recorded on an income statement before non-operating items are included. This loss only includes the results of continuing operations, and arises when operating expenses exceed revenue from operations. This is a crucial line item for investors to watch for, since it gives them a strong indication of whether a business will be able to spin off sufficient cash flow to pay dividends.

The amount of an operating loss is strongly influenced by the fixed cost structure of a business. When it has a substantial amount of fixed costs, it requires more sales in order to avoid generating an operating loss.

Examples of non-operating items that appear after the operating loss in the income statement are interest income, interest expense, and gains/losses on the sale of assets.