What is a profit sharing plan?
Credit:Thomas BarwickStoneGetty Images
Q:

What is a profit sharing plan?

A:

Quick Answer

A profit sharing plan gives employees a percentage of the profits the company earns each year. These funds are put into an investment account for the employees.

 Know More

Full Answer

With the profit sharing plan, the employees gain a sense of ownership in the company. This tends to produce harder-working, more efficient employees for the company. The employees takes pride not only in their company, but also in the work they produce. Most companies do have restrictions for when the money can be withdrawn, most without penalties. These plans can be strong financial tools used for retirement monies. Most plans offer flexibility and discretion when it comes to the funds.

Learn more about Financial Calculations

Related Questions

  • Q:

    What is annual business revenue?

    A:

    The annual business revenue is how much money a company generates in a year, whether from sales or interest from investment. Companies must keep up with annual revenue as it is a number used for tax purposes.

    Full Answer >
  • Q:

    How do you calculate average assets?

    A:

    Calculating a company's total average assets is the process of adding the total assets a company has at the end of the current year to the total assets the company has at the end of the previous year and then dividing this sum by two. Companies can also choose to use this formula with the total asset figures from at the end of 2 months rather than 2 years.

    Full Answer >
  • Q:

    What is segment margin?

    A:

    Segment margins are the total net loss and profit produced by a specific segment in a business. Tracking segment margins is useful for identifying which areas of business are performing well and which fall below expectation. Segments of business include product lines, specific store locations and subsidiaries.

    Full Answer >
  • Q:

    What is zero economic profit?

    A:

    According to Dr. Ray Batina of Washington State University, zero economic profit is the profit maximization point. At this point, price is equal to marginal cost. This scenario only applies to a perfectly competitive market.

    Full Answer >

Explore