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A and B share profits in (4:1). C gets (1/5) share only from A. What is the sacrificing ratio?

Answer and explanation

Correct answer: A alone sacrifices

A and B originally share profits in 4:1, but C’s entire 1/5 share is taken from A alone. This means A gives up 1/5 of the firm’s profit, while B gives up nothing. Sacrifice is identified by finding whose old share decreases when the new partner is admitted. The old ratio does not mean that both partners must sacrifice in that same ratio.

A’s new share becomes \\(4/5-1/5=3/5\\), while B remains at \\(1/5\\). Thus A’s sacrifice is \\(1/5\\) and B’s sacrifice is zero. The sacrificing ratio can therefore be described as A alone, so option A is correct. Any goodwill premium brought by C for this share is credited to A, because A alone has surrendered the profit entitlement.

Related tags

Single Partner SacrificeGoodwillRatio

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