What It Is:

When a company's expenses exceed revenues during a specific period of time, the company has a net loss.

How It Works/Example:

A net loss means that the company has not earned a profit during the specific reporting period.  During that time, all of the forms of revenues earned by the company are less than the expenses of running the company during that period. 
A net loss is calculated using the following formula:
    Revenues – Expenses – Current Debt = Net Profit or Net Loss

A net loss is reported on a company's profit and loss statement.

Why It Matters:

Typically, a start-up company will have a net loss during the early years as it needs to cover the one-time costs of plant, equipment, and technologies in addition to the annual operating expenses.   As a result, a company will include working capital to cover net losses during the start-up phase.  However, as sales increase, a company expects to cover the current expenses and produce a profit.  Depending on the form of the company, all or a portion of the net loss may be claimed as a tax deduction against other income, even in subsequent years.

It is the "bottom line," capturing a financial picture of a company. It is often used by investors as an important indicator of where a company is situated in terms of growth and financial stability.