Enter the investment amounts by Partner A and Partner B into the calculator to determine the partnership ratio. The calculator simplifies the ratio to its smallest whole number form.
Partnership Ratio Formula
The following formula is used to calculate the partnership ratio.
R = A : B
Variables:
- R is the partnership ratio (A:B)
- A is the investment by Partner A ($)
- B is the investment by Partner B ($)
To calculate the partnership ratio, divide the investments by their greatest common divisor to simplify the ratio to its smallest whole number form.
What is a Partnership Ratio?
A partnership ratio represents the proportion of ownership or profit-sharing between partners in a business based on their respective investments. It is an important aspect of partnership agreements and helps in determining how profits and losses are distributed among the partners.
How to Calculate Partnership Ratio?
The following steps outline how to calculate the Partnership Ratio.
- First, determine the investment made by Partner A (A).
- Next, determine the investment made by Partner B (B).
- Calculate the greatest common divisor (GCD) of A and B.
- Divide both A and B by the GCD to find the simplified ratio.
- Finally, express the partnership ratio as A:B.
- Use the calculator above to verify your results.
Example Problem :
Use the following variables as an example problem to test your knowledge.
Investment by Partner A (A) = $50,000
Investment by Partner B (B) = $100,000
