Goodwill

In finance, the term “goodwill” refers to assets which cannot be calculated in monetary terms.

In the case of a business, goodwill may include the business' customer base, reputation, and public familiarity with its name and logo. It may also include the skills of employees and the patents and technology which the business holds.

Example: A food processing company’s combined financial assets total 13 million Swiss francs. However, the company’s patented food-preservation technology significantly adds to its value as a business.

Let’s say that company were acquired by a larger food processing company for 16 million francs. In this case, the difference between the company’s financial value (13 million francs) and the price paid (16 million francs) would be considered goodwill. In this example the goodwill value of the company would come to 3 million francs.

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