Evaluating Goodwill of a company?

Question

how to do u exactly evaluate the goodwill of the company. please tells us what is the process what nesecceriy things are required for evaluating the goodwill. the company is almost 30 years old and sales appromatiely of 13 millions.

Answer 1

You need a lot of information.  Some will be easy to find and some will be quite difficult.  You need to see what (if any) organizations or charities the company donates to.   You need to find out how active they are in the community (do the sponsor local clubs or have fund raisers/food drives?)  You need to know how well they treat their employees (productio or guest satisfaction bonuses/benefits and insurance/celebrate birthdays of their employees)  the little things are important.  It would also be helpful to know what their employment rate is.. Some of this information can be found online, but it would be best to contact the company and speak with a representitive about it.   Tell them you are doing a project for school and evaluating goodwill of their company, I'm sure someone there would be more than happy to help you out.

Answer 2

Goodwill is recorded when a company is bought. Goodwill is the difference between book value and market value of the company.

The first step that you would do is to figure the book value of the company, which is the net asset (Total Assets minus Total Liabilities). This net asset is usually the minimum amount a company will accept to be purchased by.

However, in most cases, the purchaser will pay more than the net asset and that different is Goodwill.

You can take a lot of things under-consideration when evaluating goodwill. But you will never figure the exact goodwill if the company is not sold yet.

For example, if a company has total assets of $100, and total liability of $30. The the company Net asset (Book value) 100 - 30 =  $70. So, the owner of the company usually will not accept to sell the company for less than $70. However, in most cases the buyer will offer to sell the company for example for $120. So, we have a goodwill of $50.

And the buyer may pay any amount above $70 to buy the company depending on how the buyer see the potential future benefits of the company.

I hope that helps