distinguish between average profit and super profit.
Answers
Explanation:
The average profit is the average of the profits in the past few years; Or, super profit is an excess of average profit over normal profit.
ANSWER
Meaning of Average Profit: –
Meaning of Average Profit: –Average profit means the average of profits earned in the specific numbers of previous years. To calculate the average profit of the business, we have to sum up the profits of specific numbers of previous years and then divide the total with total numbers of years. We have to make adjustments in the profits of all abnormal items included in the profit/loss on the sale of fixed assets. We will use the average profit to calculate the goodwill.
Meaning of Average Profit: –Average profit means the average of profits earned in the specific numbers of previous years. To calculate the average profit of the business, we have to sum up the profits of specific numbers of previous years and then divide the total with total numbers of years. We have to make adjustments in the profits of all abnormal items included in the profit/loss on the sale of fixed assets. We will use the average profit to calculate the goodwill. Meaning of Super Profit: –
Meaning of Average Profit: –Average profit means the average of profits earned in the specific numbers of previous years. To calculate the average profit of the business, we have to sum up the profits of specific numbers of previous years and then divide the total with total numbers of years. We have to make adjustments in the profits of all abnormal items included in the profit/loss on the sale of fixed assets. We will use the average profit to calculate the goodwill. Meaning of Super Profit: –It means an excessive amount of average profit over the normal profit (which is normally or easily earned by the same type of other business in the industry). To calculate the SP of the business, we have to subtract the normal profit earned by the same type of business from the Actual average profits of specific numbers of previous years. We have to make adjustments in the profits of all abnormal items included in the profit/loss on the sale of fixed assets. We will also use the super profit to calculate the goodwill.