An important process to be outlined in the operating of the Salem Telephone company subsidiary Salem Data Services is the manner in which profits and losses are to be divided among the parties. There are several alternative methods of allocating profits and losses.
The division of subsidiary (partnership) income should be based on an analysis of the correlation between the capital and labor committed to the firm by individual partners and the income which is subsequently generated. As a result, profits might be divided in one or more following ways.
1. According to a ratio,
2. According to capital investments of the partners, and/or
3. According to the labor (or services) rendered by the partners.
Profits and Loss Ratios.
Partnership agreements frequently call for the division of profits and losses according to some ratio. Normally the ratio designed for the division of profits is also used for the division of losses, unless a specific provision to the contrary......
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Approximate Pages: 3 (260 words per double-spaced page) |