In economics and finance, the profit rate is the relative profitability of an investment project, a capitalist enterprise or a whole capitalist economy. It is similar to the concept of rate of return on investment. Scholarship has shown that the profit rate has fallen since 1945, especially after the Great Recession.
Entrepreneurship drives a need to maintain (a) the rate of profit and (b) "meeting a finite payoff period on capital investment."
Factors
The rate of profit depends on the definition of capital invested, and taxable income.
In today's complicated tax environment, with tax avoidance strategies, variable tariffs, and international tax shelters, much of a company's after-tax income can be much lower or much higher than it appears.
This "new" rate of profit (r'), which tends to fall, would be measured as
::: r' = (surplus-value)/(capital to be invested for the next period of production in order to remain competitive).
Marxian economics
In Marxian political economy, the rate of profit (r) would be measured as
::: r = (surplus value)/(capital invested).
where surplus value corresponds to unpaid labor in the production process or to profits, interest, and rent (property income). This formula can be further deconstructed into smaller constituent parts.