A, B, and C are partners sharing profits in the ratio 5:3:2. C retires and his entire share is taken by A. Calculate the new profit sharing ratio of A and B. (Answer: New Profit Sharing ratio 7:3)
Answer (1)
To solve the problem of finding the new profit-sharing ratio between partners A and B after C retires, we need to understand the initial distribution of profits and how C's share is reallocated.
Initially, A, B, and C share profits in the ratio 5:3:2. This means that out of a total of 10 parts of profit (since 5 + 3 + 2 = 10), A receives 5 parts, B receives 3 parts, and C receives 2 parts.
When C retires, his 2 parts need to be redistributed. According to the problem, A takes over C's entire share.
Let's break it down step by step:
Initial RATIOS:
A receives 5 parts of the total 10.
B receives 3 parts of the total 10.
C receives 2 parts of the total 10.
C RETIRES:
C's share of 2 parts is taken entirely by A.
NEW SHARE FOR A and B:
A's new share = original share (5 parts) + C's 2 parts = 5 + 2 = 7 parts
B's share remains unchanged as 3 parts.
NEW TOTAL PARTS:
The total parts are now 7 (A's parts) + 3 (B's parts) = 10.
NEW PROFIT-SHARING RATIO:
A : B = 7 : 3
Thus, the new profit-sharing ratio between A and B is 7:3.
