What is Profit Sharing Ratio and Return on Investment?

#EthisEduSeries Ep 6: What is Profit Sharing Ratio and Return on Investment? 

Assalamualaikum warahmatullah wabarakatuh.

Welcome to another video of the Ethis Educational Series.

Today, we’re going to explain some of the terminologies that we use at Ethis.co for our investments and projects.

In both our website and contracts, there are some special terminologies that we use to explain the contracts that we provide and the type of deals that we do. One of the underlying concepts and terminologies that we use is PSR.

PSR stands for Profit Sharing Ratio and that is something you need in a Mudharabah contract, which is a profit sharing contract. In a Mudharabah contract, when you invest in a project, you will use the PSR as an investor.

What is PSR?

PSR is the percentage of the profits generated by the project that you will have a sharing of.

So if a project has a PSR of ten percent, that means that when that project is completed, ten percent of the profit will be shared with you, the crowd. It is not just you individually, but you and everyone else who invests in the project.

That is different from the ROI. ROI is the return on investment. Now, if you look at our projects you will see that there are no fixed returns in our projects. Instead, we have a range of returns.

Why is that?

PSR is a fixed ratio but we don’t know how much profit will be generated by the project. Therefore, we cannot guarantee a fixed amount of returns great website. Instead, we will tell you that your returns will range from one percentage to another based on our estimates of what we can expect in the performance of a project.

Therefore, we have PSR underlying everything and being the ultimate determining factor.

After that, we have Projected Return which will be the percentage that you can expect to get above your principal amount when you receive a payout of your principal and the profit.

These are the two terms that you can find on our website and also in our contracts: PSR and the Projected Return on Investment or Projected Return.

So look for these things. Check them out on our website and we hope you enjoyed this video.

Thank you very much.