What is the formula for calculating the Gaining Ratio at the time of retirement of a partner from a partnership firm?
Answer & explanation
Correct answer: option 2
Gaining ratio is a type of financial tool that is helps in determining the proportion by which the remaining partners of a firm will share the profits of an existing partner in the event of his death or retirement. The ratio by which they share the profits is known as gaining ratio.
The formula of gaining ratio = New profit-sharing ratio – Old profit-sharing ratio.