It’s based on reported income. See page 35
http://blueir.investproductions.com/...19-10k-web.pdf
You can have massive debt and still make profits. Profits are basically the money left after you take all your revenue and pay all your rent/lease/finance costs (including debt service), salaries/wages/benefits, fuel, etc.
Debt is irrelevant. All (well, most) companies carry debt even when they are making millions or billions in profits. Carrying the debt (leverage) is often thought as good, and that the leverage brings in more revenue and profit than the debt servicing costs on that debt. It’s not viewed as a bad thing (in moderation) in the corporate world like it is in personal finance. For example: prior to covid, all major airlines had billions in debt, but paid out millions/billions in profit sharing, and spent billions buying back stock (when they could have used the money to pay down debt). I went on this sidebar just to illustrate how debt isn’t viewed as bad, usually, and in controlled amounts and with revenue to support it. Well, post covid, debt levels have run up, terms are worse, and revenue was slashed—so now the debt is a problem. But in calculating profit sharing, debt servicing costs (interest payments) are in that calculation. So if the debt repayments are overwhelming the company, and the company is therefore not profitable, PS won’t pay out or be a cost for the company until the revenue comes back and exceeds all those costs (including debt service).