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The average Capital employed in a business is Rs 5,00,000 and average net profit earned is Rs 65,000. If normal rate of return on capital employed is 10%, it's Super profit will be :?
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The average Capital employed in a business is Rs 5,00,000 and average ...
Calculation of Super Profit
To calculate the Super Profit, we need to first calculate the Normal Profit. Normal Profit is the minimum profit required to cover the opportunity cost of the capital employed. In this case, the Normal Rate of Return is 10% of Rs 5,00,000, which is Rs 50,000.
So, Normal Profit = Normal Rate of Return * Capital Employed = 10% * Rs 5,00,000 = Rs 50,000
Next, we need to calculate the Super Profit, which is the excess profit earned over and above the Normal Profit. In this case, the Average Net Profit earned is Rs 65,000.
So, Super Profit = Average Net Profit - Normal Profit = Rs 65,000 - Rs 50,000 = Rs 15,000
Therefore, the Super Profit earned by the business is Rs 15,000.
Explanation of Super Profit
Super Profit is the profit earned by a business over and above the minimum profit required to cover the opportunity cost of the capital employed. It is an indicator of the efficiency and effectiveness of the business in utilizing its resources to generate profits.
In this case, the Normal Profit is Rs 50,000, which is the minimum profit required to cover the opportunity cost of the capital employed. The Average Net Profit earned by the business is Rs 65,000, which is higher than the Normal Profit. This indicates that the business is making efficient use of its resources to generate profits.
The Super Profit of Rs 15,000 indicates the excess profit earned by the business over and above the Normal Profit. This can be used by the business for expansion, investment in new projects, or distribution to shareholders as dividends.
Overall, the Super Profit earned by a business is an important indicator of its financial health and performance.
To calculate the Super Profit, we need to first calculate the Normal Profit. Normal Profit is the minimum profit required to cover the opportunity cost of the capital employed. In this case, the Normal Rate of Return is 10% of Rs 5,00,000, which is Rs 50,000.
So, Normal Profit = Normal Rate of Return * Capital Employed = 10% * Rs 5,00,000 = Rs 50,000
Next, we need to calculate the Super Profit, which is the excess profit earned over and above the Normal Profit. In this case, the Average Net Profit earned is Rs 65,000.
So, Super Profit = Average Net Profit - Normal Profit = Rs 65,000 - Rs 50,000 = Rs 15,000
Therefore, the Super Profit earned by the business is Rs 15,000.
Explanation of Super Profit
Super Profit is the profit earned by a business over and above the minimum profit required to cover the opportunity cost of the capital employed. It is an indicator of the efficiency and effectiveness of the business in utilizing its resources to generate profits.
In this case, the Normal Profit is Rs 50,000, which is the minimum profit required to cover the opportunity cost of the capital employed. The Average Net Profit earned by the business is Rs 65,000, which is higher than the Normal Profit. This indicates that the business is making efficient use of its resources to generate profits.
The Super Profit of Rs 15,000 indicates the excess profit earned by the business over and above the Normal Profit. This can be used by the business for expansion, investment in new projects, or distribution to shareholders as dividends.
Overall, the Super Profit earned by a business is an important indicator of its financial health and performance.
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The average Capital employed in a business is Rs 5,00,000 and average net profit earned is Rs 65,000. If normal rate of return on capital employed is 10%, it's Super profit will be :?
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The average Capital employed in a business is Rs 5,00,000 and average net profit earned is Rs 65,000. If normal rate of return on capital employed is 10%, it's Super profit will be :? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about The average Capital employed in a business is Rs 5,00,000 and average net profit earned is Rs 65,000. If normal rate of return on capital employed is 10%, it's Super profit will be :? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The average Capital employed in a business is Rs 5,00,000 and average net profit earned is Rs 65,000. If normal rate of return on capital employed is 10%, it's Super profit will be :?.
The average Capital employed in a business is Rs 5,00,000 and average net profit earned is Rs 65,000. If normal rate of return on capital employed is 10%, it's Super profit will be :? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about The average Capital employed in a business is Rs 5,00,000 and average net profit earned is Rs 65,000. If normal rate of return on capital employed is 10%, it's Super profit will be :? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The average Capital employed in a business is Rs 5,00,000 and average net profit earned is Rs 65,000. If normal rate of return on capital employed is 10%, it's Super profit will be :?.
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