Super profit method of valuing goodwill

1. 1. Goodwill is an ________ asset.

• a) Both Intangible asset and Tangible asset

• b) Intangible asset

• c) Tangible asset

• d) None of these

2. What does goodwill represent in a business?

• a)Tangible assets of the business

• b) Future economic benefits due to intangible factors

• c) Total profits earned by the business

• d)Total liabilities of the business

3. 3. Which formula is used to calculate super profit?

• a)Average Profit - Capital Employed

• b)Normal Profit - Average Profit

• c)Average Profit - Normal Profit

• d)Normal Profit × Years' Purchase

4. 4. How is normal profit calculated in the super profit method?

• a)Average Profit × Years’ Purchase

• b) Capital Employed × Normal Rate of Return/100

• c) Super Profit × Years’ Purchase

• d)Capital Employed ÷ Normal Rate of Return

5. 5. If a business has zero super profit, what will the value of goodwill be under the super profit method?
   
   
   
   

• 5. A. Zero

• 5. B. Equal to normal profit

• 5. C. Equal to average profit

• 5. D. Negative