Features of Goodwill

Goodwill can be defined as the excess of book value of assets and liabilities and often needed in case of mergers and acquisitions. In simple words it can be defined as the probability of old customers who are satisfied with the services of the company returning back for future purchases.

Here are some of the features of goodwill –

1. It is an intangible asset implying that it is one cannot be seen or touched like land or building but it has certain value attached to it.

2. The value of goodwill is highly dependent on the person who is valuing the goodwill, in other words it is subjective in nature. Also it is difficult to assign a particular value to goodwill because it keeps on fluctuating on the basis of company’s performance.

3. It is dependent on various factors like location of the company, relationship with the suppliers, long term contracts of the company with customers etc….

Goodwill is considered to be primary reason for many mergers and acquisitions because goodwill brings customers to the acquiring company almost without any effort, though acquiring company has to pay price for goodwill.

2 comments… add one
  • David wambua

    Quite explanatory.thanks.

Leave a Comment

Related pages

devaluation of moneyadvantages of command systemadvantage and disadvantage of traditional economyskimming marketing strategyentry for prepaid expensebenefits of centrally planned economywhat does accrued income meanunqualified audit opiniondemerit of internetconglomerate corporationexamples of law of diminishing marginal utilitywhat is a conglomerate in economicsadvantages and disadvantages of capital budgeting techniqueslimitations of capitalist economytraditional economy definition economicsbills receivable accountdupont analysis equationdisadvantages of monopolistic competitioncapm assumptionsubstitute goods definition economicswhat are characteristics of a traditional economyfdi ka full formwhat is the difference between implicit and explicit costadvantages and disadvantages of capitalism and socialismcosts of deflationwhat is revenue expendituresexamples of products with elastic demandwhat is derivative marketdistinguish between costs and expensesmarket skimming pricingfund flow and cash flowterm deposit exampleexamples of overheadsdifference between perfect competition and oligopolytypes of price elasticity of demand with diagramadvantages of cash flow statementwhat is mixed economy advantages and disadvantagesmeaning of penetration pricingadvantages and disadvantages of a command economydividend policies of companiesbank loans advantages and disadvantagesskimming pricing advantagesexample of conglomerate diversificationdisadvantages of financial statementsdiversifiable and nondiversifiable risklimitation of marginal costingpros and cons of mergers and acquisitionsadvantages of industrial agricultureexamples of private goodstraditional economy meaningdisadvantages of monopolistic competitionforfeiting trade financebackward integration advantages and disadvantagesdiversifiable risk and nondiversifiable riskproblems with the barter systemwhat does proprietors meandirect and indirect quotations examplesadvantages and disadvantages of cash flowsouth africa mixed economy systemlaw of diminishing marginalpenetration pricing strategy exampleunitary elastic demand curvewhat is bartering systemconglomerate mergersthe disadvantages of globalizationcheque and draft differencewhat is an unqualified audit opinionactivity based budgeting disadvantagesdisadvantages of the payback methodadvantages and disadvantages of promotional pricingmarginal costing formatdefinition subventionweaknesses of a command economyprivatisation defineadvantages and disadvantages of stock marketbundling pricing strategywhat is cash flow and fund flowexamples of revenue expenditure and capital expenditureexamples of monopolistic competition products