Operating Loss - OL

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DEFINITION of 'Operating Loss - OL'

The net loss recorded as a result of a company's unprofitable operation, considering only the company's operating income versus its operating expenditures. An operating loss does not consider the effects of interest income, interest expense or taxes, but in some cases includes depreciation expense. A company which consistently generates operating losses will require outside financing in order to avoid bankruptcy.

BREAKING DOWN 'Operating Loss - OL'

An operating loss indicates that a company's core operations are not profitable and that changes need to be made either to increase revenues or to decrease costs. An operating loss is sometimes expected for certain start-up companies which incur high costs in an attempt to grow quickly.

In most other situations, an operating loss is a sign of potential distress at a company. An operating loss can be a particularly dire indicator for a company heavily financed with debt because the company has lost money even before considering interest payments, which may be substantial.

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