What goodwill is and how to value it
Goodwill is what a business is worth above its net assets. Value it, then credit it to the partners in their profit sharing ratio.
Task 1What goodwill is2 questions
Asha Fern and Ben Stone are partners in Fern & Stone Garden Design. Their business is worth more than the things it owns.
- Net assets
- everything the business owns, less everything it owes
- Goodwill
- the amount the whole business is worth above its net assets
Goodwill comes from things that bring in future profit but are not in the books: a good name, loyal customers, skilled staff.
Fern & Stone has net assets of £70,000. A buyer offers £100,000 for the whole business.
Task 2Putting a value on goodwill5 questions
Task 3Whose goodwill it is3 questions