partnership concept for cat
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Answer:
The topic of partnership is an essential part of CAT quantitative aptitude segment. These questions are repeated almost every year and thus, CAT aspirants are suggested to be properly acquainted with this topic to be able to solve the related questions easily in the exam. A detailed explanation along with solved examples on the topic of partnership is given here to help the individuals learn this topic more efficiently.
What is a Partnership?
Partnership is whenever at least two individuals hold hands with a shared objective to achieve benefits. Each accomplice contributes either time, cash or licenses to enable the association firm to harvest benefits.
A partner who only invests money is called a Sleeping Partner and a partner who invests money and mainly manages the business is called the working partner. Some other important points associated with partnership are given below.
Whenever at least two individuals hold hands to make a start-up or some business it’s known as an ‘association’ business.
Regularly, they contribute some capital and procure some benefit. Furthermore, this benefit is circulated among accomplices either in some prefixed proportion or the proportion of their venture.
When the periods of investment are equal, the profits or losses are in the ratio of the corresponding investments.
These points are better understood by knowing the types of partnerships. The detailed explanations of the different types of partnerships are given below.
Types of Partnerships:
There are mainly two types of partnership i.e. simple and compound partnerships. The details of both of them are given below.
Simple Partnership
In such partnerships, the resources are invested for the same time period by all the investors i.e. the capital (or other resources) stays in the business for the same duration. In this kind of partnership, the profit is distributed in proportion of their contributed resources.
Rule 1: Simple Partnership Formula
If P and Q contributed Rs. a and b respectively for one year in a business, their profit (or loss) at that time will be-
=> P’s benefit (or misfortune) : Q’s profit(or misfortune) = a : b
Compound Partnership
In compound partnership, the money is invested for different periods of time by different investors. In this, the benefit-sharing proportion is ascertained by duplicating the capital contributed with the unit of time (generally months).
Rule 2: Compound Partnership Formula
=> P1 : P2 = C1 × T1 : C2 × T2
Here,
P1 = Partner 1’s Profit.
C1 = Partner 1’s Capital.
T1 = Time period for which Partner 1 contributed his capital.
P2 = Partner 2’s Profit.
C2 = Partner 2’s Capital.
T2 = Time period for which Partner 2 contributed his capital.
Explanation:
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