On 1 August 2013, Larry Goldstein and Rafi Hassan Created

question 33

Multiple Choice

On 1 August 2013, Larry Goldstein and Rafi Hassan created a partnership to produce software for online advertising. Goldstein was a lawyer and would handle all the legal matters, but Hassan was the technical whiz and would do all of the production and sales. Because most of the work would be done by Hassan, the partnership agreement specified that the yearly profit would be split in a two- phase allocation. The first $100 000 of annual profit would be split among Goldstein and Hassan in a 1:4 ratio (one part to Goldstein, four parts to Hassan) . Any profit above $100 000 would be split evenly. At the onset, both men contributed $200 000 to the partnership and made no withdrawals during 2013. At the end of 2013, the partnership earned $175 000 of profit. How much was allocated to Goldstein?

• A)$76 500
• B)$35 000
• C)$57 500
• D)$28 750

---

Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations.

Budget

Company’s plan for how it will raise and spend money during a given period of time.

Asset Turnover Ratio

A financial metric that measures the efficiency of a company at using its assets to generate revenue or sales.

Return On Equity

A financial ratio that measures the amount of net income returned as a percentage of shareholders' equity, indicating the profitability of a company relative to owner's investments.