Question

What is the formula for calculating Sacrifice Ratio?

Hint:

To calculate the Sacrifice Ratio, subtract the new profit-sharing ratio from the old one for each partner.

Answer 1

Step 1: Understanding Sacrifice Ratio.
The Sacrifice Ratio is used to calculate the proportion of their share that existing partners give up when a new partner joins the partnership. It is calculated as the difference between the old profit-sharing ratio and the new profit-sharing ratio.
Step 2: Formula for Sacrifice Ratio.
The formula for calculating the Sacrifice Ratio is: \[ \text{Sacrifice Ratio} = \text{Old Profit Sharing Ratio} - \text{New Profit Sharing Ratio} \] Step 3: Conclusion.
The Sacrifice Ratio indicates how much of their profit share the remaining partners give up in order to accommodate the new partner.