Question

Under the pure capital ratio plan of allocating profits, the partner who invested the most capital will ultimately shoulder the biggest share of the loss.

a. True
b. False

Answer 1

Under the pure capital ratio plan of allocating profits, the partner who invested the most capital will ultimately shoulder the biggest share of the loss.

Step-by-step explanation:

Under the pure capital ratio plan of allocating profits, the partner who invested the most capital will ultimately shoulder the biggest share of the loss.

This statement is true as per the pure capital ratio plan. It is common for partnerships to allocate profits and losses based on the partners' capital contributions. This means that the partner who invested more capital will assume a larger portion of the losses if the partnership incurs them.

For example, if Partner A invested $10,000 and Partner B invested $5,000, Partner A would bear 2/3 of the loss, while Partner B would bear 1/3 of the loss.