If Partner A contributes 60% of the capital and Partner B contributes 40%, how s
Practice Questions
Q1
If Partner A contributes 60% of the capital and Partner B contributes 40%, how should profits be divided if they agree to split based on capital contribution?
60% to A and 40% to B
50% to A and 50% to B
70% to A and 30% to B
40% to A and 60% to B
Questions & Step-by-Step Solutions
If Partner A contributes 60% of the capital and Partner B contributes 40%, how should profits be divided if they agree to split based on capital contribution?
Step 1: Identify the total capital contributions of both partners. Partner A contributes 60% and Partner B contributes 40%.
Step 2: Understand that profits will be divided based on the percentage of capital each partner contributed.
Step 3: Calculate the total profit amount that needs to be divided (for example, if the total profit is $100).
Step 4: Calculate Partner A's share of the profit by taking 60% of the total profit. (For example, 60% of $100 is $60.)
Step 5: Calculate Partner B's share of the profit by taking 40% of the total profit. (For example, 40% of $100 is $40.)
Step 6: Conclude that Partner A receives 60% of the profits and Partner B receives 40% of the profits.
Capital Contribution – The amount of money or resources that each partner invests in a business, which determines their share of profits.
Profit Sharing – The method by which profits are distributed among partners based on their contributions or agreed-upon terms.
