When Is an Increase in Earnings a Loss?
Sometimes an increase in company earnings can disguise an operating loss. If a company’s operating expenses exceed its operating income; it has an operating loss. If it also has income from investments and tax benefits, this income can offset the loss and show an increase in earnings per share. However, if these other sources of non-operating income are not recurring, the unsuspecting investor may come to the wrong conclusion about the company’s overall financial health.