Applied Mathematics · Ch 1 — Numbers, Quantification and Numerical Applications
Partnership
Partnership
A partnership is formed when two or more people agree to jointly run a business as co-owners, sharing in its risks, responsibilities, and — most importantly for this topic — its profits and losses. The people involved are called partners, and how they share outcomes depends on how they invested.
If every partner contributes capital for the exact same length of time, the arrangement is called a simple partnership; if partners invest different amounts for different durations, it is called a compound partnership. In either case, profits or losses are divided among the partners in proportion to their investment and the time for which it was invested — not the amount invested alone. This gives the governing relationship:
Ratio of investment Time Ratio of profit
So for two partners A and B:
(A's investment A's time) : (B's investment B's time) A's profit : B's profit …