Win rate

In economics, the profit ratio describes the proportion of income from entrepreneurial and self-employed activities as well as income from capital and assets in the national income.

Definition / explanation

The win rate is the counterpart to Wage share, in which the income from non-self-employed work is set in relation to the national income. The profit rate is thus a key figure that relates to the performance of an economy.

Als Ergänzung zur Wage share werden in der Gewinnquote all die Einkünfte herangezogen, die bei den Einkünften aus nicht-selbstständiger Arbeit unberücksichtigt bleiben. Dazu zählen Einkünfte aus unternehmerischen Tätigkeiten wie beispielsweise

  • Corporate profits that flow to the shareholders
  • Income that arises from activities that are considered self-employed
  • Income from rent, leasing, interest, investments and the like are generated

All of the aforementioned income is summarized under the term profits. In this way, the respective shares in the national economic income can be determined more precisely.

In the case of the profit ratio, it is important to ensure that the size relates to the type of economic activity and not to the status of employees, for example. A non-self-employed employee can still contribute to the profit rate, for example by having income from renting and leasing or capital income.

In fact, it is true for a not inconsiderable part of the non-self-employed that they contribute to the profit rate in one form or another.

Calculation of the win rate

If the wage share is known, the profit share can be determined using a simple formula:

Profit share = 1 - wage share

Since the national income consists only of these two components, the above relationship must inevitably result. The share of national income that is not derived from the wage share is described by the profit share.

Alternatively, the profit rate can be determined via:

Profit ratio = profits / national income

The profit ratio thus corresponds to the relative (percentage) share of profits in national income.

Summary

  • Income from entrepreneurial and self-employed activities as well as capital and assets are profits
  • Profit ratio corresponds to the share of profits in national income (national income)
  • Supplement to the wage share (national income = wage share + profit share)
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