Why do we calculate the gaining ratio at the time of retirement or death of any partner in the partnership firm?

To find out the compensation to be paid to retiring or deceased partner.

The correct answer is option 2- To find out the compensation to be paid to retiring or deceased partner.

Gaining ratio is calculated at the time of retirement or death of a partner. When the partner retires, the profit sharing ratio of the continuing partners gets changed. When a partner retires or dies, their share in the partnership (including goodwill) needs to be settled. The remaining partners usually gain the outgoing partner’s share of profits, so we calculate the gaining ratio to determine Who gains how much of the outgoing partner's share, And in what ratio they should compensate the retiring or deceased partner. This compensation usually includes Share of goodwill.