How is goodwill defined in relation to a firm's anticipated excess ea…

Goodwill, in relation to a firm's anticipated excess earnings, is defined as the present value of the firm's future profits. It represents the value attached to the expected additional earnings or profits that the firm is anticipated to generate over and above the normal profits. The concept of goodwill recognizes that an established business with a good reputation, wide business connections, and other intangible factors may have the ability to earn more profits compared to a newly set up business or other firms in the same industry. The monetary value of this advantage is considered as goodwill.