When might there be a need to compute a new profit-sharing ratio amon…

When the remaining partners acquire the share of the retiring/deceased partner in a different proportion than their old ratio, there is a need to compute a new profit sharing ratio among the remaining partners. This means that the distribution of the retiring/deceased partner's share in the profits will not follow the existing ratio among the remaining partners. In such cases, it becomes necessary to determine the new profit sharing ratio to reflect the updated distribution of profits among the remaining partners. This ensures that each partner's share consists of their own existing share in the firm, as well as the share acquired from the retiring or deceased partner. The new profit sharing ratio will be calculated based on the agreed upon proportion in which the remaining partners acquire the share of the retiring or deceased partner. By computing a new profit sharing ratio, the partners can establish a fair and updated framework for sharing future profits in accordance with the revised distribution resulting from the acquisition of the retiring or deceased partner's share.