Question

 

Describe the factors affecting the value of goodwill.

16 Feb 2026
Answer :
Word Count : 507
Goodwill represents the value of a business over and above its identifiable net assets and arises due to reputation, customer loyalty, brand strength, managerial efficiency, and other intangible advantages. The value of goodwill is not fixed and is influenced by several internal and external factors that affect the earning capacity and market perception of a business. One of the primary factors affecting goodwill is the profitability of the business. Higher and stable profits increase goodwill because they indicate strong earning potential. If a firm consistently earns above-average profits compared to industry standards, buyers are willing to pay more, thereby increasing goodwill value. On the other hand, declining or unstable profits reduce confidence among investors and reduce goodwill. The nature of the business is another important factor. _______ __________ ________ __________ _______ ______ ____ ____ _______ ______ ________.
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