What are the factors which influence goodwill?

Answer 1

Goodwill is an intangible asset that reflects a business's customer connections, reputation and other similar factors. Goodwill shows the value of a firm's reputation. When a firm has a brand with a certain reputation and particular status within the market, this can be measured to have a lesser or greater value. If this is a positive value, then it is called goodwill. Goodwill is a fixed asset- something that has value in the company for an extended period.

Since goodwill is not something that can be touched or felt, it can occasionally be difficult to calculate what it is worth. This is why goodwill is also an intangible asset in accounting.

Goodwill can be valued as the difference between the value of the separable net assets of a firm and the total value of the firm.

There are many factors that may be valuable when calculating goodwill, other than reputation:

All in all, goodwill can be characterized as something that may generate future returns in the company.

There are many factors that may be valuable when calculating goodwill, other than reputation:

· When a firm has a dedicated and solid customer base, goodwill can be found. If customers have respect for a company, they can potentially share a positive message and recommend the firm to others, ultimately bringing more capital to the enterprise.

· If a company has run a major advertising campaign the effect of this can also influence a company’s goodwill.

· Also, added value can be found in new agreements, integrations or partners, which are known to bring in new income.

All in all, goodwill can be characterized as something that may generate future returns in the company.