Match List I with List II
|
LIST I |
LIST II |
|
A. Super Profit |
I. Actual Average Profit - Normal Profit |
|
B. Normal Profit |
II. Super Profit × $\frac{100}{Normal\, rate\, of\, return}$ |
|
C. Goodwill |
III. Total Assets - Outside Liabilities |
|
D. Capital Employed |
IV. $\frac{Capital\, Employed × Normal\, Rate\, of\, Return}{100}$ |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → A-I, B-IV, C-II, D-III.
|
LIST I |
LIST II |
|
A. Super Profit |
I. Actual Average Profit - Normal Profit |
|
B. Normal Profit |
IV. $\frac{Capital\, Employed × Normal\, Rate\, of\, Return}{100}$ |
|
C. Goodwill |
II. Super Profit × $\frac{100}{Normal\, rate\, of\, return}$ |
|
D. Capital Employed |
III. Total Assets - Outside Liabilities |
A. Super Profit- I. Actual Average Profit - Normal Profit.
Super profit is earned by a firm when there actual profit is more than the normal profit i.e. profit earned by a similar business.
B. Normal Profit- IV. $\frac{Capital\, Employed × Normal\, Rate\, of\, Return}{100}$.
Normal profit is the minimum profit that a business needs to earn to cover the cost of capital. It is usually calculated as a percentage of the capital employed.
C. Goodwill- II. Super Profit × $\frac{100}{Normal\, rate\, of\, return}$.
Capitalisation Method- Under this method the goodwill can be calculated in two ways: (a) by capitalizing the average profits, or (b) by capitalising the super profits.
Goodwill as per capitalisation of super profit = Super profit x 100/ Normal rate of return.
D. Capital Employed- III. Total Assets - Outside Liabilities.
Firms’ Capital = Total Assets (excluding goodwill) – Outside Liabilities, Where outside Liabilities include both long term and short term Liabilities.