The Most Appropriate Basis for Dividing Partnership Net Income When

question 71

Multiple Choice

The most appropriate basis for dividing partnership net income when the partners do not plan to take an active role in daily operations is

• A) on a fixed ratio.
• B) interest on capital balances and salaries to the partners.
• C) on a ratio based average capital balances.
• D) salaries to the partners and the remainder on a fixed ratio.

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Definitions:

Welfare Economics

Normative evaluation of markets and economic policy.

Equilibrium

A state in which market supply and demand balance each other, resulting in stable prices and quantities.

Efficient

Refers to a level of performance that uses the least amount of inputs to achieve the highest amount of output.

Utility Possibilities Frontier

A curve that shows the maximum feasible amount of two goods that can be produced with available resources and technology, indicating the trade-offs and efficiency in production.