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Profit Sharing Ratio Video Lecture - Commerce
FAQs on Profit Sharing Ratio Video Lecture - Commerce
| 1. What is profit sharing ratio? |  |
Ans. Profit sharing ratio refers to the proportion in which the profits of a partnership firm are distributed among its partners. It determines how the profits will be divided among the partners based on their agreed-upon sharing ratio.
| 2. How is profit sharing ratio calculated? | |
Ans. Profit sharing ratio is usually determined by an agreement between the partners of a firm. It is calculated by dividing the share of each partner by the total share of all partners. For example, if there are three partners with profit sharing ratios of 2:3:5, the total ratio would be 2+3+5=10. Therefore, the profit sharing ratio for each partner would be 2/10, 3/10, and 5/10 respectively.
| 3. Can profit sharing ratio be changed? | |
Ans. Yes, profit sharing ratio can be changed with the mutual consent of all the partners. If the partners decide to change the ratio, they need to amend the partnership agreement and inform the concerned authorities. However, any change in the profit sharing ratio may have financial and tax implications, so it's important to carefully consider the consequences before making any changes.
| 4. How does profit sharing ratio affect partner's income? | |
Ans. The profit sharing ratio directly affects the income of each partner. A higher profit sharing ratio means a larger share of the profits for that partner, resulting in higher income. Conversely, a lower profit sharing ratio would result in a smaller share of the profits and lower income for that partner. Therefore, the profit sharing ratio plays a crucial role in determining the financial benefits received by each partner.
| 5. What factors are considered when deciding the profit sharing ratio? | |
Ans. Several factors are taken into consideration when deciding the profit sharing ratio. These may include the initial capital contribution made by each partner, the level of expertise and experience brought by each partner, the amount of time and effort invested by each partner, and the overall contribution towards the growth and success of the partnership. Additionally, any special arrangements or agreements made between the partners can also influence the profit sharing ratio.
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Nov 16, 2024 Last updated |
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