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…