Suppose A's business is valued at 30 units and B adds 20 units.
• Total capital = 50 units.
• A's capital ratio = 60%; B's = 40%.
• They agree that profit will be shared 80% to A and 20% to B.
• Business value rises to 100, so profit = 50 units.
• B gets 20% of 50 = 10 units; with his original 20, his total entitlement = 30.
• A gets 40 profit units; with his original 30, his total entitlement = 70.
Opening interactive controls...
Worked Example: Capital and Profit
Transaction and Working-Capital Financing
Suppose A's business is valued at 30 units and B adds 20 units.
• Total capital = 50 units.
• A's capital ratio = 60%; B's = 40%.
• They agree that profit will be shared 80% to A and 20% to B.
• Business value rises to 100, so profit = 50 units.
• B gets 20% of 50 = 10 units; with his original 20, his total entitlement = 30.
• A gets 40 profit units; with his original 30, his total entitlement = 70.