Legal Definitions - negative income

Negative income occurs when an individual or entity's total expenses and costs surpass their total revenue or earnings over a specific period. Essentially, it signifies a financial loss rather than a profit, meaning more money went out than came in.

• Example 1: Small Business Operations

  A local bakery, "Sweet Delights," spent $8,000 on ingredients, employee wages, and rent in a particular month. However, its total sales from pastries and custom cakes for that same month only generated $7,200 in revenue.

  This illustrates negative income because the bakery's expenses ($8,000) exceeded its revenue ($7,200), resulting in a financial loss of $800 for that month.

• Example 2: Household Budgeting

  Mark and Lisa's combined take-home pay for the month was $6,000. After paying their mortgage, car loans, utility bills, groceries, and other necessary expenses, their total outgoings for the month amounted to $6,500.

  Here, Mark and Lisa experienced negative income of $500 for the month. Their household spending surpassed their earnings, indicating a deficit in their personal finances.

• Example 3: Investment Performance

  An investor bought a bond for $5,000. Over the next year, the bond's value declined to $4,700 due to market fluctuations, and it paid no interest during that period.

  The investor experienced negative income of $300 on this investment. Instead of generating a return, the investment resulted in a loss of capital over the specified timeframe.