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Questions and Answers
What is the formula to calculate Super Profit?
What is the calculated amount of Goodwill using the Capitalisation Method?
Which method calculates Goodwill as the present value of the average super profit?
If Super Profit is ₹52,382 and the Normal Rate of Return is 12%, what is the Goodwill as per the Capitalisation Method?
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What does Goodwill represent in the context of a business?
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Study Notes
Super Profit
- Super profit is the excess profit earned by a business above the normal profit.
- It is the profit after considering the cost of capital employed in the business.
- Super profit can be calculated by subtracting the normal profit from the actual average profit.
Calculation of Goodwill
- Goodwill can be calculated using various methods including the capitalization method and the annuity method.
- The capitalization method calculates goodwill based on the ratio between super profit and the normal rate of return expressed as a percentage.
- The Annuity method calculates goodwill as the present value of the average super profit, discounted at a particular rate.
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Description
This quiz explores the concepts of super profit and its significance in business. It covers methods for calculating goodwill, including the capitalization and annuity methods. Test your knowledge on how these financial concepts interrelate and their implications for business valuation.
