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Super Profit Method in Goodwill

Super Profit Method: (Goodwill method): When a firm earns huge profit in comparison to normal profit (usually earned by other firms of similar industry) then the difference is termed as Super Profit. Goodwill is computed on the basis of Super profit due to prospect expectations of learning capacity of the firm.

Super profit = Average profit ­ Normal profit
Normal Profit = Investment (Capital Employed) x Normal Rate of Return/100

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