What Is the Profit Motive? The profit motive is the intent to achieve a monetary gain in a project, transaction, or material endeavor. Profit motive can also be construed as the underlying reason why a taxpayer or company participates in business activities of any kind. Simply put, the profit motive suggests that people tend to
What Is a Profit-Sharing Plan? A profit-sharing plan is a retirement plan that gives employees a share in the profits of a company. Under this type of plan, also known as a deferred profit-sharing plan (DPSP), an employee receives a percentage of a company’s profits based on its quarterly or annual earnings. A profit-sharing plan
What Is a Profits Interest? Profits interest refers to an equity right based on the future value of a partnership awarded to an individual for their service to the partnership. The award consists of receiving a percentage of profits from a partnership without having to contribute capital. In effect, it is a form of equity
What Is a Profit-Volume (PV) Chart? A profit-volume (PV) chart is a graphic that shows the earnings (or losses) of a company in relation to its volume of sales. Companies can use profit-volume (PV) charts to establish sales goals, analyze whether new products are likely to be profitable, or estimate breakeven points. Key Takeaways A
What Is Pro Forma? Pro forma means “for the sake of form” or “as a matter of form.” When it appears in financial statements, it indicates that a method of calculating financial results using certain projections or presumptions has been used. Pro forma financials are not computed using generally accepted accounting principles (GAAP) and usually leave
What Are Pro-Forma Earnings? Pro-forma earnings most often refer to earnings that exclude certain costs that a company believes result in a distorted picture of its true profitability. Pro-forma earnings are not in compliance with standard GAAP methods and are usually higher than those that comply with GAAP. The term may also refer to projected
What Is a Pro-Forma Forecast? A pro-forma forecast is a financial forecast based on pro-forma income statements, balance sheets, and cash flow statements. Pro-forma forecasts are usually created from pro-forma financial statements and are forecasted using basic forecasting procedures. When making these forecasts, revenues will usually provide the initial groundwork for the forecast, and expenses
What Is a Pro Forma Invoice? A pro forma invoice is a preliminary bill of sale sent to buyers in advance of a shipment or delivery of goods. It will typically describe the purchased items and other important information, such as the shipping weight and transport charges. Key Takeaways Pro forma invoices are sent to buyers ahead
What Are Progress Billings? Progress billings are invoices requesting payment for work completed to date. Progress billings are prepared and submitted for payment at different stages in the process of a major project. This type of billing is common in projects that last a long time. It allows the person billing—usually a contractor—to fund the
What Is a Progressive Tax? A progressive tax involves a tax rate that increases (or progresses) as taxable income increases. It imposes a lower tax rate on low-income earners and a higher tax rate on those with a higher income. This is usually achieved by creating tax brackets that group taxpayers by income ranges. The
