Question

R and S are partners sharing profits in the ratio of 5 : 3. T joins the firm as a new partner. R gives 1/4th of his share and S gives 1/5th of his share to the new partner. Find out new profit-sharing ratio.

Answer 1

Answer:

Profit sharing refers to various incentive plans introduced by businesses that provide direct or indirect payments to employees that depend on company's profitability in addition to employees' regular salary and bonuses. In publicly traded companies these plans typically amount to allocation of shares to employees.

Answer 2

New Profit - Sharing ratio is calculated below:

Explanation:

Old Ratio between R and S is 5: 3

Calculating Sacrificing Ratio:

Sacrificing Ratio = Old Ratio $\times$ Surrender Ratio

R's sacrifice

$=\frac{5}{8} \times \frac{1}{4}=\frac{5}{32}$

S's sacrifice

$=\frac{3}{8} \times \frac{1}{5}=\frac{3}{40}$

T's share = R's sacrifice + S's sacrifice

T's share

$=\frac{5}{32}+\frac{3}{40}=\frac{25}{160}+\frac{12}{160}=\frac{37}{160}$

Calculating New Ratio:

New Ratio = Old ratio - Sacrificing Ratio

R's $=\frac{5}{8}-\frac{5}{32}=\frac{20-5}{32}=\frac{15}{32}$

S's $=\frac{3}{8}-\frac{3}{40}=\frac{15-3}{40}=\frac{12}{40}$

Calculating New Profit Sharing Ratio:

New Profit Sharing Ratio between R, S and T

$\begin{aligned}&=\frac{15}{32}: \frac{12}{40}: \frac{37}{160}\\&=\frac{75}{160}: \frac{48}{160}: \frac{37}{160}\end{aligned}$

R, S and T would share profits in the ratio of 75 : 48 : 37.