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Valuation of Goodwill - Capitalization of Super Profit Method Video Lecture | Advanced Corporate Accounting - B Com

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FAQs on Valuation of Goodwill - Capitalization of Super Profit Method Video Lecture - Advanced Corporate Accounting - B Com

1. What is the Capitalization of Super Profit Method for the valuation of Goodwill?
Ans. The Capitalization of Super Profit Method is a technique used to calculate the value of Goodwill by capitalizing the super profit earned by a business over and above the normal profit.
2. How is super profit calculated in the Capitalization of Super Profit Method?
Ans. Super profit is calculated by deducting the normal rate of return on the tangible assets from the actual profit of the business.
3. What are the key factors considered in the Capitalization of Super Profit Method for valuing Goodwill?
Ans. The key factors considered in this method include the average annual super profit, the rate of capitalization, and the estimated number of years for which the super profit is expected to continue.
4. How is the rate of capitalization determined in the Capitalization of Super Profit Method?
Ans. The rate of capitalization is determined based on the risk associated with the business, the stability of earnings, prevailing market conditions, and the growth prospects of the business.
5. What are the limitations of the Capitalization of Super Profit Method for valuing Goodwill?
Ans. Some limitations of this method include its reliance on future projections, the subjectivity in determining the rate of capitalization, and the exclusion of factors like brand value and customer loyalty in the valuation process.
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