Liverpool suffered a £19.8m loss last season despite generating more revenue than ever before.
The Premier League side boosted revenue by £3.9m to a club record £301m, yet finished the year in the red as a result of "further investment and turnover in the first team squad" in the year ending 31 May 2016.
Twelve additions were made to the Liverpool first team last season ahead of the arrival of manager Jurgen Klopp, including Roberto Firmino for £29m and Nathaniel Clyne for £13m.
Despite the loss, chief operating officer Andy Hughes said "these results demonstrate the solid financial progress that's been made over the past six years" under the leadership of owners Fenway Sports Group (FSG).
"The investments from this ownership have been a key factor to our financial and global progress," said Hughes.
"We have seen continued investment in the playing squad; the expanded Main Stand; the new flagship retail store opening later this year; fully refurbished retail stores in Liverpool and Belfast; and we are consulting on a proposed development at our Academy in Kirkby to bring together the first team and our young players.
“These investments all contribute to further progress and strengthen the club’s financial position which ultimately serves to support all of our football ambitions."
Mo' Main Stand, Mo' Money?
Liverpool's match-day revenue was not harmed by a lack of Champions League football and in fact increased by £3.4m to £62.4m last season, largely thanks to the club's runs to the League Cup and Europa League final.
However, the construction of an expanded Main Stand weighed on the club's ability to acquire new sponsorships as commercial revenue fell by £700,000 to £115.7m.
Nevertheless, Liverpool still snapped up 10 new partnerships during the period and increased digital followers by 18 per cent to cross the 50m mark.
Revenue lags behind rivals – but reasons for optimism
Liverpool still have some catching up to do to match the income levels of their rivals at the top of the Premier League – Chelsea, Arsenal, Manchester City and Manchester United all enjoyed greater revenue last season.
They were all beneficiaries of the Champions League cash cow. Despite reaching the Europa League final, Liverpool still received less money from Uefa than United did from being dumped out of Europe's premier competition at the group stage.
A place amongst Europe's elite would have pushed TV revenue even higher, which still increased by £1m to £123.6m.
Yet there are reasons to believe Liverpool can gain ground in the coming seasons. Matchday revenue, which was smaller than Chelsea's, Arsenal's and United's but larger than City's, is expected to increase by £25m this season thanks to the extra 8,500 seats installed in the refurbished Main Stand.
Commercial revenue is already ahead of Arsenal's and on a par with Chelsea's while broadcasting revenue will also enjoy a significant bump this year.