Q.Priya started a tiffin service business by investing ₹40000. After 4 months her friend Rekha joined her business and invested ₹50000 in it. What will be the share of Rekha in the profit if they earn ₹220000 as profit in the entire year?

Investment Ratio Calculation — A First Look

Imagine you and a friend decide to start a small business together. You put in ₹50,000, and your friend puts in ₹30,000. At the end of the year, you make a profit of ₹16,000. How should you split it?

The fair answer is not "half each" — you put in more money, so you should get a larger share. That's the entire intuition behind investment ratios: profit is shared in the same proportion as the money invested.

The Core Idea

An investment ratio is simply a comparison of the amounts different people (or groups) put into a venture. If you invest ₹50,000 and your friend invests ₹30,000, the ratio of your investment to theirs is:

Like any ratio, you simplify it by dividing both sides by their common factor (here, 10,000):

That's your investment ratio. It tells you that for every ₹5 you put in, your friend put in ₹3.

From Ratio to Profit Share

Now, how does this ratio translate into actual money? The total investment is ₹80,000. Your share of the total is:

Your friend's share is:

So the profit of ₹16,000 is split as:

• You: $\frac{5}{8} \times 16,000 = ₹10,000$
• Friend: $\frac{3}{8} \times 16,000 = ₹6,000$

Notice that $10,000 : 6,000$ simplifies to $5 : 3$ — the same as the investment ratio. Profit is always divided in the ratio of investment.

When Investments Are for Different Durations

Here's where it gets slightly more interesting. What if you invested ₹50,000 for the full year, but your friend invested ₹30,000 only for the last 6 months? Is it still fair to split profit 5:3?

No — because your money was at work for twice as long. The solution is to convert each investment into an equivalent "money × time" unit, called the product.

• Your product: $50,000 \times 12 = 6,00,000$ (rupee-months)
• Friend's product: $30,000 \times 6 = 1,80,000$ (rupee-months)

Now compare these products:

That's the effective investment ratio. Profit is now split in the ratio 10 : 3, not 5 : 3.

The Precise Statement

For any partnership (or any situation where returns are proportional to contribution):

Profit (or loss) is shared in the ratio of the product of each partner's investment and the time period for which it was invested.

If all time periods are equal, this reduces to the ratio of the investments themselves.

A Quick Example to Lock It In

Three partners start a business:

• A invests ₹2,00,000 for 12 months
• B invests ₹1,50,000 for 8 months
• C invests ₹1,00,000 for 6 months

Compute the products:

• A: $2,00,000 \times 12 = 24,00,000$
• B: $1,50,000 \times 8 = 12,00,000$
• C: $1,00,000 \times 6 = 6,00,000$

Ratio: $24 : 12 : 6 = 4 : 2 : 1$

If the profit is ₹70,000, then:

• A gets $\frac{4}{7} \times 70,000 = ₹40,000$
• B gets $\frac{2}{7} \times 70,000 = ₹20,000$
• C gets $\frac{1}{7} \times 70,000 = ₹10,000$

The One Thing to Remember

Investment ratio is not about who put in more money — it's about who contributed more value, where value = money × time. That single idea handles every variation you'll ever see in exams.