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WELCOME
GOODWILL AND
FACTORS
INFLUENCING
GOODWILL.
DEFINITION
“ GOODWILL IS THE VALUE OF REPUTATION OF A FIRM IN RESPECT OF PROFIT EXPECTED IN FUTURE OVER THE ABOVE NORMAL RATE OF PROFITS”
MEANINGIT 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.
FACTORS INFLUENCING
GOODWILL
FAVOURABLE LOCATION
NATURE OF BUSINESS
EFFICIENCY OF MANAGEMENT
TIME FACTOR
CAPITAL REQUIREMENTS
MARKET CONDITION
SPECIAL ADVANTAGES.
FAVOURABLE LOCATION
IF THE BUSINESS IS
LOCATED IN A PROMINENT
LOCALITY HAVING HEAVY
CUSTOMER TRAFFIC, THE
GOODWILL TENDS TO BE
HIGH.
NATURE OF BUSINESS
A FIRM WHICH
PRODUCES GOODS HAVING
STABLE DEMAND IS ABLE TO
EARN MORE PROFITS AND
THEREFORE, HAS MORE
GOODWILL.
EFFICIENCY OF
MANAGEMENT
A WELL MANAGED
CONCERN ENJOYS THE
ADVANTAGE OF HIGH
PRODUCTIVITY AND
PROFITABILITY. HENCE, ITS
GOODWILL WILL BE MORE.
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.
CAPITAL REQUIREMENTS
A BUSINESS WHICH
REQUIRES LESSER AMOUNT
OF CAPITAL WILL HAVE MORE
GOODWILL THAN ONE WITH
HIGH CAPITAL REQUIREMENT.
MARKET CONDITION
MONOPOLY
CONDITIONS OR LIMITED
COMPETITION ENABLES A
BUSINESS CONCERN TO EARN
HIGH PROFITS AND ENJOY
MORE GOODWILL.
SPECIAL ADVANTAGES
A FIRM WITH SPECIAL
ADVANTAGES LIKE IMPORT
LICENCES, ASSURED
SUPPLY OF ELECTRICITY AT
LOW RATES, ETC., ENJOYS
HIGHER VALUE OF
GOODWILL.
THANK YOU…