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Simple English definitions for legal terms
net loss
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A quick definition of net loss:
Net loss refers to a situation where a company's expenses are greater than its revenue, resulting in a negative profit. This means that the company has lost money instead of making a profit. It is also known as a net operating loss.
A more thorough explanation:
Definition: Net loss refers to the amount by which a company's expenses exceed its revenues in a given period. It is also known as a net operating loss.
For example, if a company has $100,000 in revenue and $120,000 in expenses in a year, it would have a net loss of $20,000.
Another example could be a startup company that is investing heavily in research and development, marketing, and other expenses to grow its business. In the early stages, it may have a net loss as it is not generating enough revenue to cover its expenses.
The examples illustrate that a net loss occurs when a company's expenses exceed its revenues. This can happen for various reasons, such as high operating costs, low sales, or investments in growth. A net loss is an important metric for businesses as it indicates the financial health of the company and its ability to generate profits in the future.