Chapter 3: Valuation of Goodwill

Let's learn more about goodwill and its various aspects!

Details

Over a period of time, a well - established business develops an advantage of having a reputation and wide connections. These factors benefit the business.
In accounting, the monetary value of such advantage is known as 'Goodwill'. A firm having goodwill has the capacity to earn more profit than a common firm, and value of goodwill in turn depends on profit earning capacity of the firm.
So, we can say that goodwill doesn't exist for businesses that earn a normal amount of profit or incur loss.


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