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