People invest in business to make profits. When two or more people invest in a business, it is known as ‘Partnership’.
Whenever a profit is made by a business, amount invested and duration for which the amount was invested dictates the ratio in which profit is shared by the partners.
Profit ( directly proportional ) Investment
Profit (directly proportional) Time for which investment is done.
P1 – Profit by 1st Person
I1 – Investment by 1st person
T1– Time for which money was invested by 1st person
P2 – Profit by 2nd Person
I2 – Investment by 2nd person
T2 – Time for which money was invested by 1st person
Eg. A and B entered into a partnership where A invested Ra.300 for first 3 months and Rs. 600 for next 9 months. On the other hand, B invested Rs.500 for the entire year. In what ratio will their profit of Rs. 820 be divided?
If the profit was Rs.41, A would receive Rs. 21 and B would receive Rs.20.
When profit is Rs.820, A will receive 820/41 x 21 = Rs. 420 and B will receive Rs. 400.