Now suppose value falls from 50 to 40 units.
• Total loss = 10 units.
• Loss follows capital ratio, not profit ratio.
• B invested 40%, so B bears 4 units and his 20 becomes 16.
• A invested 60%, so A bears 6 units and his 30 becomes 24.
The example is useful because it separates the legal roles from the cash movement. Once those roles are clear, the same principle can be applied to more complex commercial cases.
Profit follows the valid agreed ratio; loss follows the capital ratio.
Opening interactive controls...
Transaction and Working-Capital Financing
Now suppose value falls from 50 to 40 units.
• Total loss = 10 units.
• Loss follows capital ratio, not profit ratio.
• B invested 40%, so B bears 4 units and his 20 becomes 16.
• A invested 60%, so A bears 6 units and his 30 becomes 24.
The example is useful because it separates the legal roles from the cash movement. Once those roles are clear, the same principle can be applied to more complex commercial cases.
Profit follows the valid agreed ratio; loss follows the capital ratio.