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A B and C share in 2:3:5. C retires and his share is taken by A B in 3:2. What will be the new ratio?

Answer and explanation

Correct answer: 1:1

The old shares are A = 2/10, B = 3/10 and C = 5/10. When C retires, C’s 5/10 share is acquired by A and B in the ratio 3:2. Hence A receives 3/10 and B receives 2/10 from C’s share. Their new shares become A = 2/10 + 3/10 = 5/10 and B = 3/10 + 2/10 = 5/10.

Both continuing partners therefore receive equal portions of future profits. The final ratio is 5:5, which reduces to 1:1. The ratio 3:2 is only the acquisition ratio and cannot be used alone as the new ratio. Thus option A, 1:1, is correct; option D expresses the same ratio before simplification but is not the selected answer.

Related tags

Acquisition RatioNew RatioRetirement

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