Goodwill refers to a description of the "good name" of 19459002 or its "reputation" that a business is searching for in commerce. If a business provides a good service to its customers, they hope to return to your business over and over again. This will hopefully have a positive impact on future business turnover and profits. From the accounting point of view, goodwill is a tool for business and has a real monetary value.
Key features of goodwill:
- It belongs to the category of intangible assets that includes other elements, such as patents, trademarks and copyrights. Goodwill, together with other intangible assets is not physical assets and is included in the balance sheet
- This is a valuable asset.
- Contributes to gaining extra profit. The existence of goodwill is often of key importance to businesses that have gained more than the level of similar businesses in the same industry.
- Its value is subject to constant fluctuations.
- Value is only achieved when the business is sold or transferred
- It is difficult to give good value to goodwill and will always include expert judgment
Main factors affecting goodwill:
- The nature of the business. Goodwill for service-based business is likely to be different from manufacturing.
- Favorable place. If a business is in a good location, it usually has a positive impact on goodwill.
- For a long time. If a business has traded for a long time, it may take some time to create good reputation and goodwill.
- Possession of Licenses or Technical Know-how
- After-Sales Services and General Customer Support.
- Business Opportunity
- Future Competition and New Entrants to a Business Marketplace
- Management's Attitude to Commitment
Specific circumstances when it is necessary for valuation Goodwill:
Goodwill, though not necessarily black and white, is a vital part of your business value, and it's important that you do not value your value to buy or sell an established company.
Source by sbobet