All terms
Glossary
Profit-sharing ratio
PSR
The pre-agreed split of realized profit between the parties — e.g. 60/40 — applied to profit, never to capital.
The profit-sharing ratio (e.g. investor 60% / manager 40%) is agreed before the venture begins and applies to whatever profit is actually realized.
Critically, the ratio attaches to realized profit — not to the capital amount. Quoting a return as a percentage of capital (a yield) would turn the arrangement into a guaranteed return, which is riba. If the venture makes no profit, there is nothing to share.
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