Corporate Profit

  

A religious man with a sponsorship from Nike. A holy man who sold out for money. That’s a corporate “prophet.”

A corporate profit is something completely different. Companies earn revenue from the sales of goods and services. They also incur expenses ranging from marketing costs to the salaries and bonuses of employees.

Subtract the expenses from the top-line revenues, and you get an important number for a company's income statement: its profit. Profits are...what's left. On an income statement, corporate profit is also known as net income.

Related or Semi-related Video

Finance: What is a Profit-Sharing Plan?3 Views

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Finance allah shmoop what is a profit sharing plan Hey

00:07

all you employees you gets keep thirty percent of this

00:11

company's profits okay that's a profit sharing plan and in

00:14

general they're really good to have in place Why Well

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because when employees are financially incentivized to act like owners

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or co owners companies just generally do a whole lot

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better Welcome to the advent of the profit sharing plan

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Directly sharing in profits is one way employees get rewarded

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when their company does well and punished when it doesn't

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But some companies pay their employees in stock instead instead

00:37

of cash because in a given situation where a company

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trades and on twenty times earnings taking say fifteen percent

00:44

of those earnings out of the prophet bull and giving

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them to employees well it essentially cost shareholders twenty times

00:50

that earnings number in the form of simply a lower

00:53

priced stock like if they were going to earn one

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hundred million dollars in Instead they only earned eighty five

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while twenty times the hundred million mornings is two billion

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and twenty times the eighty five million is one point

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Seven there's three hundred million dollars of market cap gone

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Yeah that's not such a good idea so paying employees

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with stock has become a whole lot more of a

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thing these days Then not the challenge and allocating profits

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among employees of course lives inside of the concept of

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attribution meaning who was responsible for actually producing profits in

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this area or that who was naughty you know and

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who was nice And what if a company has multiple

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divisions where it's senior manager did incredible work during a

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time where the jet engine division usually loses money such

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that the manager heroically helped the company's division toe on

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ly lose three percent that year Well compare this manager

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to the manager of the insurance division which in a

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normalized competitive world should have made twenty percent profit margins

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this year but only made eighteen Well who did better

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The insurance guy or the jet engine gal Well who

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gets more profit And how is the profit allocated among

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the most senior managers who actually can directly affect profits

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versus the junior hardworking people who are really projectiles of

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whatever their senior managers tell them to do so Yeah

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it's Not an easy process This whole profit sharing thing

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And in practise allocating profits among managers inside of divisions

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in companies that actually have profit sharing plans is usually

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done in such a way as to have the quote

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Lowest rung on the corporate ladder unquote Be directly involved

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in allocating those profits so that fewer employees feel like

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they're under appreciated when the final prophet allocations get made

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And so that you know the janitor who spent all

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year cleaning out the urinals doesn't feel you know totally 00:02:42.808 --> [endTime] whizzed upon by the senior management there Yeah

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