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Which of the following best describes the term 'profit-sharing ratio' in a partn

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Question: Which of the following best describes the term \'profit-sharing ratio\' in a partnership?

Options:

  1. The ratio in which partners share losses
  2. The ratio in which partners contribute capital
  3. The ratio in which partners share profits
  4. The ratio of time spent by partners in the business

Correct Answer: The ratio in which partners share profits

Solution: 

The profit-sharing ratio refers to the ratio in which partners agree to share the profits of the partnership.

Which of the following best describes the term 'profit-sharing ratio' in a partn

Practice Questions

Q1
Which of the following best describes the term 'profit-sharing ratio' in a partnership?
  1. The ratio in which partners share losses
  2. The ratio in which partners contribute capital
  3. The ratio in which partners share profits
  4. The ratio of time spent by partners in the business

Questions & Step-by-Step Solutions

Which of the following best describes the term 'profit-sharing ratio' in a partnership?
  • Step 1: Understand that a partnership is a business arrangement where two or more people share the responsibilities and profits.
  • Step 2: Know that partners can agree on how to divide the profits they earn from the business.
  • Step 3: The 'profit-sharing ratio' is the specific way they decide to split those profits.
  • Step 4: For example, if two partners agree to share profits 60% to one partner and 40% to the other, their profit-sharing ratio is 60:40.
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