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Question
What are the factors affecting goodwill?
Options
Nature of business
Location
Efficiency of management
All of the above
Solution
All of the above
Explanation:
The following are the primary factors that influence the value of goodwill:
Nature of business: A company that provides high-value-added items or has a consistent demand might earn more money and hence gain more goodwill.
Location: Goodwill is likely to be high if the business is centrally located or in a well-trafficked area.
The efficiency of management: High productivity and cost efficiency are normally advantages of a well-managed company. As a result, profits will rise, and the value of goodwill will rise as well.
Market situation: The monopoly or restricted competition allows the company to produce large profits, resulting in a higher goodwill value.
Special advantages: The firm with specific advantages such as import licenses, low-cost and reliable electricity, long-term contracts for material supply, well-known collaborators, patents, trademarks, and so on, has a higher goodwill value.
