Question

X and Y were partners sharing profits in the ratio of 3 : 2. They admitted P and Q as new partners X surrendered 1/3rd of his share in favour of P and Y surrendered 1/4th of his share in favour of Q. Calculate new profit-sharing ratio of X, Y , P and Q.

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 is calculated below.

Explanation:

Old ratio of X and Y is 3:2

Calculating Sacrificing Ratio:

Sacrificing ratio = Old ratio $\times$ sacrificing ratio

X’s sacrifice

$=\frac{3}{5} \times \frac{1}{3}=\frac{3}{15}$

Y’s sacrifice

$=\frac{2}{5} \times \frac{1}{4}=\frac{2}{20}$

Calculating New Ratio:

New Ratio= Old Ratio- Sacrificing ratio

X’s share

$=\frac{3}{5}-\frac{3}{15}=\frac{9-3}{15}=\frac{6}{15}$

Y’s share

$=\frac{2}{5}-\frac{2}{20}=\frac{8-2}{20}=\frac{6}{20}$

P’s share = X’s sacrifice = 3/15

Q’s share = Y’s sacrifice = 2/20

Thus, new profit sharing ratio of X:Y:P:Q would be $=\frac{6}{15}: \frac{6}{20}: \frac{3}{15}: \frac{2}{20}$

$\begin{array}{l}=\frac{24: 18: 12: 6}{60} \\=4: 3: 2: 1\end{array}$

Thus the new profit sharing ratio becomes 4 : 3 : 2 :1