3. DEFINITION
“ GOODWILL IS THE
VALUE OF REPUTATION OF
A FIRM IN RESPECT OF
PROFIT EXPECTED IN
FUTURE OVER THE ABOVE
NORMAL RATE OF
PROFITS”
4. MEANING
IT IS THE PRESRNT VALUE OF
FIRMS ANTICIPATED EXCESS
EARNINGS. IT CAN ALSO BE STATED
AS THE EXTRA VALUE ATTACHED TO
THE NET WORTH OF A BUSINESS. IT
ENABLES A BUSINESS CONCERN TO
EARN MORE PROFIT ON THE CAPITAL
EMPLOYED BY ATTRACTING MORE
CUSTOMERS. SO, IT IS AN INVISIBLE
AND INTANGIBLE ASSET.
5. FACTORS INFLUENCING
GOODWILL
FAVOURABLE LOCATION
NATURE OF BUSINESS
EFFICIENCY OF MANAGEMENT
TIME FACTOR
CAPITAL REQUIREMENTS
MARKET CONDITION
SPECIAL ADVANTAGES.
6. FAVOURABLE LOCATION
IF THE BUSINESS IS
LOCATED IN A PROMINENT
LOCALITY HAVING HEAVY
CUSTOMER TRAFFIC, THE
GOODWILL TENDS TO BE
HIGH.
7. NATURE OF BUSINESS
A FIRM WHICH
PRODUCES GOODS HAVING
STABLE DEMAND IS ABLE TO
EARN MORE PROFITS AND
THEREFORE, HAS MORE
GOODWILL.
8. EFFICIENCY OF
MANAGEMENT
A WELL MANAGED
CONCERN ENJOYS THE
ADVANTAGE OF HIGH
PRODUCTIVITY AND
PROFITABILITY. HENCE, ITS
GOODWILL WILL BE MORE.
9. TIME FACTOR
A BUSINESS CONCERN
RUNNING PROFITABLY FOR A
LONG PERIOD WILL HAVE
MORE VALUE OF REPUTATION
THAN A BUSINESS WHICH HAS
BEEN RECENTLY
ESTABLISHED.
10. CAPITAL REQUIREMENTS
A BUSINESS WHICH
REQUIRES LESSER AMOUNT
OF CAPITAL WILL HAVE MORE
GOODWILL THAN ONE WITH
HIGH CAPITAL REQUIREMENT.
12. SPECIAL ADVANTAGES
A FIRM WITH SPECIAL
ADVANTAGES LIKE IMPORT
LICENCES, ASSURED
SUPPLY OF ELECTRICITY AT
LOW RATES, ETC., ENJOYS
HIGHER VALUE OF
GOODWILL.
