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Profit Ratio = (Capital ├Ч Time) Ratio.
- Formula: PAтАЛ:PBтАЛ=(CAтАЛ├ЧTAтАЛ):(CBтАЛ├ЧTBтАЛ).
- If Time is same: Profit тИЭ Capital.
- If Capital is same: Profit тИЭ Time.
Example:
Q: A invests 20k for 1 year. B 30k for 1 year.
Solution: PAтАЛ:PBтАЛ=20:30=2:3. When capitals change mid-year (e.g., adding/withdrawing money).
- Method: Calculate 'Month-Equivalent Capital'.
- TotalCapital=(C1тАЛ├ЧM1тАЛ)+(C2тАЛ├ЧM2тАЛ)+...
Example:
Q: A invests 1000. After 4 months, adds 500. Total year.
Solution: 1000├Ч4+1500├Ч8=4000+12000=16000. Active partner gets salary/commission, Rest profit is shared.
- Equation: Net Shared Profit = Total Profit - (Salary + Commission).
- This Net Profit is then split by C├ЧT ratio.
Example:
Q: Total Profit 1000. A gets 10% for management. Ratio A:B is 1:1.
Solution: Management Fee: 100. Distributable: 900.
A gets 100+450=550. B gets 450. Finding Capital or Time from Profit Ratio.
- Capital Ratio: CAтАЛ:CBтАЛ=(PAтАЛ/TAтАЛ):(PBтАЛ/TBтАЛ).
- Time Ratio: TAтАЛ:TBтАЛ=(PAтАЛ/CAтАЛ):(PBтАЛ/CBтАЛ).
Example:
Q: Profit 2:3. Capital 1:2. Find Time Ratio.
Solution: TAтАЛ:TBтАЛ=(2/1):(3/2)=2:1.5=4:3. Often x% is donated or kept as reserve.
- Logic: Distribute only (100тИТx)% of the Total Profit amongst partners.
Example:
Q: Profit 2000. 10% to charity. A:B is 3:2.
Solution: Distributable = 90% of 2000 = 1800.
A = 3/5├Ч1800=1080.