Question

$R,S$ and $M$ are partners sharing profits in the ratio of $\frac{2}{5},\frac{2}{5}$ and $\frac{1}{5}$. $M$ decides to retire from the business and his share is taken by $R$ and $S$ in the ratio of $1:2$. Calculate the new profit-sharing ratio.

Answer 1

Old ratio (R, S and M) = 2:2:1

M retires from the firm

His profit share = 1/5

M’s share taken by R and S in the ratio of 1:2

Share taken by R = 1/5 X 1/3 = 1/15

Share taken by S = 1/5 X 2/3 = 2/15

New ratio = Old ratio + Share acquired from M

R’s new share =2/5 + 1/15 = 6/15 + 1/15 = 7/15

S’s new share = 2/15 + 2/15 = 6/15 +2/15 = 8/15

New profit (R and S) = 7 : 8