Sacrificing Ratio

Admitting a new partner necessarily means the old partners must each give up some part of the share of profit they earlier enjoyed, to make room for the incoming partner's share — this reduction is called a sacrifice, and the ratio in which the old partners make this sacrifice is the Sacrificing Ratio.

Sacrificing Ratio = Old Share of a Partner − New Share of the Same Partner

The Sacrificing Ratio is not merely an academic label — it is the ratio used, later in this chapter, to decide exactly how much of the PREMIUM FOR GOODWILL brought in by the new partner is credited to each old partner: a partner who sacrifices more of his old share is compensated with a correspondingly larger share of the goodwill the new partner pays for that sacrifice, while a partner whose share happens to remain unchanged (or, unusually, even rises) after admission earns no share of that goodwill compensation at all. …