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Out going partner is compensated for parting with firm’s future profit’s in favour of remaining partners. The remaining partners contribute to such compensation in :
- a)Gaining Ratio
- b)Capital Ratio
- c)Sacrificing Ratio
- d)Profit sharing Ratio
Correct answer is option 'A'. Can you explain this answer?
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Out going partner is compensated for parting with firm’s future ...
There are several ways in which an outgoing partner may be compensated for parting with a firm. Here are a few possible scenarios:
1. Buyout agreement: The firm may enter into a buyout agreement with the outgoing partner, whereby the partner receives a lump sum payment in exchange for relinquishing their ownership interest in the firm. This payment is typically based on the partner's share of the firm's net assets or a predetermined formula.
2. Profit-sharing arrangement: If the firm has a profit-sharing system in place, the outgoing partner may be entitled to a share of the firm's profits up until the date of their departure. This can be calculated based on the partner's ownership percentage or a specific formula outlined in the partnership agreement.
3. Deferred payments: In some cases, the compensation for the outgoing partner may be structured as a series of deferred payments over a specified period of time. This allows the firm to distribute the financial impact of the buyout over several years while providing the outgoing partner with a steady stream of income.
4. Non-compete agreement: As part of the compensation package, the firm may require the outgoing partner to sign a non-compete agreement, which restricts them from starting or joining a competing business for a certain period of time. In exchange for agreeing to this restriction, the partner may receive additional compensation.
It's important to note that the specific compensation arrangement will depend on the terms outlined in the partnership agreement and any negotiations between the firm and the outgoing partner.
1. Buyout agreement: The firm may enter into a buyout agreement with the outgoing partner, whereby the partner receives a lump sum payment in exchange for relinquishing their ownership interest in the firm. This payment is typically based on the partner's share of the firm's net assets or a predetermined formula.
2. Profit-sharing arrangement: If the firm has a profit-sharing system in place, the outgoing partner may be entitled to a share of the firm's profits up until the date of their departure. This can be calculated based on the partner's ownership percentage or a specific formula outlined in the partnership agreement.
3. Deferred payments: In some cases, the compensation for the outgoing partner may be structured as a series of deferred payments over a specified period of time. This allows the firm to distribute the financial impact of the buyout over several years while providing the outgoing partner with a steady stream of income.
4. Non-compete agreement: As part of the compensation package, the firm may require the outgoing partner to sign a non-compete agreement, which restricts them from starting or joining a competing business for a certain period of time. In exchange for agreeing to this restriction, the partner may receive additional compensation.
It's important to note that the specific compensation arrangement will depend on the terms outlined in the partnership agreement and any negotiations between the firm and the outgoing partner.
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Out going partner is compensated for parting with firm’s future profit’s in favour of remaining partners. The remaining partners contribute to such compensation in :a)Gaining Ratiob)Capital Ratioc)Sacrificing Ratiod)Profit sharing RatioCorrect answer is option 'A'. Can you explain this answer?
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