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If two partners decide to share profits equally but one partner contributes more
If two partners decide to share profits equally but one partner contributes more capital, what is the likely outcome?
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Practice Questions
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Q1
If two partners decide to share profits equally but one partner contributes more capital, what is the likely outcome?
The partner with more capital will receive a larger share of profits
The partners will renegotiate their profit-sharing agreement
The partnership will dissolve
The partner with less capital will receive a larger share of profits
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Typically, partners who contribute more capital may negotiate for a larger share of profits.
Questions & Step-by-step Solutions
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Q
Q: If two partners decide to share profits equally but one partner contributes more capital, what is the likely outcome?
Solution:
Typically, partners who contribute more capital may negotiate for a larger share of profits.
Steps: 5
Show Steps
Step 1: Two partners agree to share profits equally.
Step 2: One partner puts in more money (capital) than the other partner.
Step 3: The partner who contributed more capital may feel they deserve a larger share of the profits.
Step 4: The partners may discuss and negotiate how to split the profits fairly considering the capital contribution.
Step 5: They might agree on a new profit-sharing ratio that reflects the capital contributions.
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