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Question 3

What is sacrificing ratio? Why is it calculated?

Answer

Sacrificing ratio refers to the ratio in which the old partners surrender their share of profit in favour of new partner/s.It is calculated by the difference between old ratio and new ratio of the old partner/s.

 
Sacrificing ratio = Old ratio – new ratio
 
It is very important to calculate this ratio, as the new partner need to compensate the old partners for sacrificing their share of profit. The new partner compensate to old partners by making payment to them in the form of goodwill that is transferred among the old partners in their sacrificing ratio.

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