If a non trading asset is included in capital while calculating normal profit what may happen to super profit?

Correct answer: Super profit may be understated

Super profit equals maintainable profit minus normal profit, and normal profit is calculated on the appropriate capital employed at the normal rate. A non-trading asset does not normally contribute to the firm’s operating profits. If it is wrongly included in capital employed, the capital base becomes overstated; consequently, calculated normal profit also becomes too high. Subtracting this inflated normal profit from maintainable profit produces an understated super profit, which can also lead to an understated goodwill valuation. Therefore option A is correct. The effect is not always an increase, normal profit does not become nil, and goodwill cannot become cash merely because of a classification error.