Ratios: Question 3 – Sharing according to amount and duration of investment

The partners of a partnership form of business, Nas and Nak have agreed to invest their money in the business as follows:

Nas will invest $4,000 for 6 months in the business

Nak will invest $9,000 for 5 months in the business.

At the end of their first financial year, the business recorded a profit of $27,600 after providing for all expenses.

You are required to share the profit for Nas and Nak in the ratio of their investments

Solution

Given that

Nas invests $4,000 for 6 months and

Nak invests $9,000 for 5 months.

Their investment ratio will be

Nas:Nak = ($4000*6) : ($9000*5)

Nas:Nak = $24000 : $45000

Nas:Nak = 24:45

Nas:Nak = 8:15

Total ratio = 8+15 = 23

Profit to be shared = $27,600

Thus, their share of profit will be

Nas = (⁸/₂₃)   * $27600 = $9,600

Nak = (¹⁵/₂₃) * $27600 = $18,000