Definition of Goodwill
Goodwill is a kind of
asset to any business organization. This is simply the positive image of the
firm to all its stakeholders and it grows for outstanding performance over long
period of time. But measuring goodwill of any firm is different from other
assets of the firm. When the ownership of a firm gets changed, there is certain
amount of money that is taken as goodwill of that firm and as per that amount;
goodwill is presented in the balance sheet of respective organization. This is
nothing imaginative digits in the asset section of balance sheet.
Importance of Goodwill
Goodwill is nothing so
easy to attain and hold. Every firm must continuously perform well and improve the
performance to maintain goodwill. We simply understand the difference between
two firms one of which is performing for 50 years with super quality of its
products and services and another just started performing so nice in last 5
years only. The goodwill of both of the firm will not be same. There must be a
reasonable amount of goodwill in the balance sheet in each firm to show
complete and real picture of financial status of that firm.
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