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Home Accounting Dictionary Letter C Capitalization of Super Profit Method Definition:
 
 

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Capitalization of Super Profit Method Definition:

Under this method, goodwill is calculated by capitalization of super profits at agreed rate. The goodwill calculated directly by applying the following formula:

Goodwill = P - rc / m

Where

P = Adjusted forecast maintainable profit

r = Normal rate of return

c = Capital employed

m = Capitalization ratio

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