DEFINITION of ‘Red’
Red is a business expression relating to a negative balance on a company’s financial statements.
A related term, red ink, describes the same meaning: a financial loss.
BREAKING DOWN ‘Red’
The phrase “in the red” is used widely to refer to companies that have not been profitable within their last accounting period. This term is derived from the color of ink used to by accountants to enter a negative figure on a company’s financial statements.
Red as a color is often used in business to indicate that something unwanted is happening. The color is also used in this context outside of a firm’s balance sheet. For example, regulations governing businesses are often referred to as red tape. Investors may also refer to a security position losing money as being in the red.
Today, most financial and operational ledgers are maintained electronically; it is not uncommon for software to utilize red and black coloring to highlight results.
Red ink is synonymous with the business expressions: bleeding red ink or in-the-red. Whereas, it’s common to hear a healthy business describes as in the black.