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Business Profit Sharing Calculations

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Nakul P Pillai
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Topics covered

  • capital ratios,
  • subscription amounts,
  • financial ratios,
  • business calculations,
  • financial contributions,
  • business partnerships,
  • business profit sharing,
  • profit ratios,
  • investment returns,
  • investment duration
0% found this document useful (0 votes)
26 views4 pages

Business Profit Sharing Calculations

Uploaded by

Nakul P Pillai
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Topics covered

  • capital ratios,
  • subscription amounts,
  • financial ratios,
  • business calculations,
  • financial contributions,
  • business partnerships,
  • business profit sharing,
  • profit ratios,
  • investment returns,
  • investment duration

1.

A and B invest in a business in the ratio 3 : 2. If 5% of the total profit goes to charity and A's share is
Rs. 855, the total profit is:

Rs. 1425

Rs. 1500

Rs. 1537.50

Rs. 1576

2.

A, B and C jointly thought of engaging themselves in a business venture. It was agreed that A would
invest Rs. 6500 for 6 months, B, Rs. 8400 for 5 months and C, Rs. 10,000 for 3 months. A wants to be
the working member for which, he was to receive 5% of the profits. The profit earned was Rs. 7400.
Calculate the share of B in the profit.

Rs. 1900

Rs. 2660

Rs. 2800

Rs. 2840

3.

A, B and C enter into a partnership in the ratio : : . After 4 months, A increases his share 50%. If
the total profit at the end of one year be Rs. 21,600, then B's share in the profit is:

Rs. 2100

Rs. 2400

Rs. 3600

Rs. 4000

4.

A, B, C subscribe Rs. 50,000 for a business. A subscribes Rs. 4000 more than B and B Rs. 5000 more
than C. Out of a total profit of Rs. 35,000, A receives:

Rs. 8400

Rs. 11,900

Rs. 13,600

Rs. 14,700
5.

Three partners shared the profit in a business in the ratio 5 : 7 : 8. They had partnered for 14 months,
8 months and 7 months respectively. What was the ratio of their investments?

[Link]

20 : 49 : 64

38 : 28 : 21

None of these

6.

A starts business with Rs. 3500 and after 5 months, B joins with A as his partner. After a year, the
profit is divided in the ratio 2 : 3. What is B's contribution in the capital?

Rs. 7500

Rs. 8000

Rs. 8500

Rs. 9000

7.

A and B entered into partnership with capitals in the ratio 4 : 5. After 3 months, A withdrew of his

capital and B withdrew of his capital. The gain at the end of 10 months was Rs. 760. A's share in
this profit is:

Rs. 330

Rs. 360

Rs. 380

Rs. 430

8.

A and B started a partnership business investing some amount in the ratio of 3 : 5. C joined then after
six months with an amount equal to that of B. In what proportion should the profit at the end of one
year be distributed among A, B and C?

[Link]

[Link]
6 : 10 : 5

Data inadequate

9.

A, B, C rent a pasture. A puts 10 oxen for 7 months, B puts 12 oxen for 5 months and C puts 15 oxen
for 3 months for grazing. If the rent of the pasture is Rs. 175, how much must C pay as his share of
rent?

Rs. 45

Rs. 50

Rs. 55

Rs. 60

10.

A and B started a business in partnership investing Rs. 20,000 and Rs. 15,000 respectively. After six
months, C joined them with Rs. 20,000. What will be B's share in total profit of Rs. 25,000 earned at
the end of 2 years from the starting of the business?

Rs. 7500

Rs. 9000

Rs. 9500

Rs. 10,000

11.

A began a business with Rs. 85,000. He was joined afterwards by B with Rs. 42,500. For how much
period does B join, if the profits at the end of the year are divided in the ratio of 3 : 1?

4 months

5 months

6 months

8 months

12.

Aman started a business investing Rs. 70,000. Rakhi joined him after six months with an amount of
Rs.. 1,05,000 and Sagar joined them with Rs. 1.4 lakhs after another six months. The amount of profit
earned should be distributed in what ratio among Aman, Rakhi and Sagar respectively, 3 years after
Aman started the business?
7 : 6 : 10

12 : 15 : 16

42 : 45 : 56

Cannot be determined

13.

Arun, Kamal and Vinay invested Rs. 8000, Rs. 4000 and Rs. 8000 respectively in a business. Arun left
after six months. If after eight months, there was a gain of Rs. 4005, then what will be the share of
Kamal?

Rs. 890

Rs. 1335

Rs. 1602

Rs. 1780

14.

Simran started a software business by investing Rs. 50,000. After six months, Nanda joined her with a
capital of Rs. 80,000. After 3 years, they earned a profit of Rs. 24,500. What was Simran's share in the
profit?

Rs. 9,423

Rs. 10,250

Rs. 12,500

Rs. 10,500

Common questions

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The rent is split based on each partner's contribution to the usage, expressed in "oxen-months." For A, B, and C, calculate their oxen-months: A uses 10 oxen for 7 months, B uses 12 oxen for 5 months, and C uses 15 oxen for 3 months . A has 70 oxen-months, B has 60, and C has 45. Calculate the total oxen-months and compute the fraction of the total for each partner. C's rent share is then (C's oxen-month contribution/Total oxen-months) * Total rent. C should pay Rs. 45 .

To calculate B's share, first determine the total profit. Given A's share is Rs. 855, and 5% goes to charity, 95% of the total profit equates to the sum of the shares. Therefore, let the total profit be P. Since A's investment ratio is 3, A's share would be (3/5 of 0.95P). Thus, 0.95P x (3/5) = 855, which implies P = Rs. 1500 . Then, calculate B's share as 2/5 of (P - 5% of P). Thus, B's share is Rs. 570.

Determine each partner's share by calculating effective capital investment over time, typically by multiplying the capital by the duration of the investment. For example, if A invests for a full year, B joins after 5 months, and C after 6 months, calculate each partner's contribution as follows: A's share is based on 12 months of his capital, B's on 7, and C's on 6 months of theirs . Sum these results to establish the total effective capital. Divide the profit according to these effective ratios. From these computations, each partner's share in the profit is defined by their effective investment ratio.

Equity in distribution, when all subsequent partners equate their capital to the initial highest, involves recalculating the total effective capital contributions proportionate to entry-time duration. Awaiting equator investment—a handling formula for substantive early investors (proportional to length): All investments multiplied by respective plus-significant join offsets determine nominal share adjustments for equitable dividends derived from combinative proportions adjusted to unified entry . Execute dynamic end-of-term accounting specifically considering compounded delayed entry as seen with Scenario C joining analogous capital to B halfway through post-A’s initial. Allocation equitability considers graduated consistency per investment duration.

To determine B's joining time, equate the effective capital contributions from A and B to the profit sharing ratio. Let B join after 'x' months. For the whole year, A's effective capital is Rs. 85,000 x 12, and B's is Rs. 42,500 x x. Given the profit sharing ratio is 3:1, thus (85,000 x 12)/(42,500 x x) = 3/1. Solving for x, B should have been effective for 4 months .

Increasing capital contributions within an existing partnership impacts profit shares by recalibrating the effective capital invested over time for that member. The partner's weighted investment amount increases their claim during the re-evaluation period; recalculating investment ratios impacts everyone’s share at year-end based on new balance of capital times duration. This 50% increment means increased claim on higher total profits unless others adjust similarly, causing a proportional shift among others' incomes, requiring recalculating entire contribution period values .

The effective capital for each partner is adjusted according to their time of investment and any changes in the investment amount. Initially, A, B, and C's ratio for investment doesn't provide numbers but rather the timing of their investment. If A increases his share by 50% after 4 months, then effectively, for calculation, A's capital account is adjusted to (initial investment * time before increase + increased investment * remaining time). Similarly, apply the time-investment factor to B and C. Calculate the adjusted ratios by (Investment * Time), then deduce the final profit distribution ratio considering total effective contributions. With total profit Rs. 21,600, calculate B's share based on their effective ratio compared to the whole .

Challenges include aligning the effective investment-time contributions over an extended period, adjusting for mid-term changes in capital, and accounting for differences in initial versus later contributions. Additionally, partners may join with varying amounts later or increase their investment. Accurately reflecting these variables in profit shares requires computing effective investments which vary significantly across these time spans. Initial conditions and resultant carry-through impacts further complicate fiscal allocations, requiring detailed time-weighted calculations .

To maintain a predetermined ratio like 2:3, calculate the equivalent effective contribution for the new partner relative to the existing partner over 12 months. If the known share is derived from maintaining total capital equity: let A's capital be fixed. With B joining later, the goal is to make B's effective contribution align to the forepartioned share. Calculate using the formula: (Fixed Capital x Total Months)/(New Capital x Less Months) = Ratio, solving for the months B should be effective till the year’s end to equate to 3 of any pair 2:3 implied ratio .

To establish the investment ratio, calculate the total effective investment. This is done by multiplying the amount invested by the duration of investment in months for each partner. Suppose A invests a fixed amount for a 12-month period, B joins with a different amount partway, and C follows. You calculate: A = Initial investment x 12; B = Capital x months joined; C = Capital x months. Calculate the ratios of these products, which represents their proportional stake in the business. This determines how profits are split relative to their effective contribution measured in 'investment-months' .

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