There are many factors that affect the valuation of goodwill. They are as follows:
1. Location
The business located in a suitable place commands more goodwill than others.
2. Capital
The more, the capital of business, the more chance of goodwill. A firm with a high debt will have to pay more interest from profit of the firm and naturally goodwill will be less.
3. Nature Of Business
A firm with a constant sales has more chance of earning profit and naturally goodwill too.
4. Efficient Management
A good management brings more profits to the business. Increase in the value of goodwill is the result of efficient management.
5. Contract
Firm may enter into a contract of sales for long period. A firm can make more profit on sale of goods on that contract by making purchase on reasonable terms. This lead to increase in the value of goodwill.
6. Patent Right
A firm having patent right for production of goods can earn more goodwill than others.
7. Quality Of The Product
A firm producing qualitative products can easily have name and fame in the market. This lead to increase in the value of goodwill.
8. Government Patronage
The product of an enterprises will be more demand, when it is patronized by government. As a result, the goodwill increases.
9. Other Factors
Besides the factors mentioned above, money market condition, peace in the country, government's policy, tendency of profit etc. also affects the valuation of goodwill.
1. Location
The business located in a suitable place commands more goodwill than others.
2. Capital
The more, the capital of business, the more chance of goodwill. A firm with a high debt will have to pay more interest from profit of the firm and naturally goodwill will be less.
3. Nature Of Business
A firm with a constant sales has more chance of earning profit and naturally goodwill too.
4. Efficient Management
A good management brings more profits to the business. Increase in the value of goodwill is the result of efficient management.
5. Contract
Firm may enter into a contract of sales for long period. A firm can make more profit on sale of goods on that contract by making purchase on reasonable terms. This lead to increase in the value of goodwill.
6. Patent Right
A firm having patent right for production of goods can earn more goodwill than others.
7. Quality Of The Product
A firm producing qualitative products can easily have name and fame in the market. This lead to increase in the value of goodwill.
8. Government Patronage
The product of an enterprises will be more demand, when it is patronized by government. As a result, the goodwill increases.
9. Other Factors
Besides the factors mentioned above, money market condition, peace in the country, government's policy, tendency of profit etc. also affects the valuation of goodwill.
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