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There are two groups under a company.

In the first year

Group 1: Earned 100k

Group 2: Earned 70k

In the second year

Group 1: Lost 300k (delta 1: -300k)

Group 2: Lost 80k (delta 2: -80k)

That means after the second year,

Group 1: Contributed -200k to the company

Group 2: Contributed -10k to the company

I saw that there are 2 ways of calculating the repayment amount of each group to the company.

Method 1: They pay whatever amount they lost (group 1 pays 300k and group 2 pays 80k)

Method 2: Group 1 pays (200k/210k)*380k and Group 2 pays (10k/210k)*380k

I think method 2 makes more sense to me since we have to account the previous amount each group earned for the company but my question is what are the differences between these two methods? Thank you!

mathqt
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1 Answers1

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In method 1 the groups just pay what they have lost to the company.

In method 2 the groups pay the proportion of what they lost, weighed against the cumulative loss of all the groups. In this method, the amount lost by one group relative to the total amount lost by all the groups is what matters

Alborz
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