Which Factor does not Affect the Value of Goodwill?

The correct answer is Option (3) → Location and Address of Partners

Goodwill is the value of a firm’s reputation and its power to earn more than normal profits. It depends on things about the business — what it sells, where it is, how it is run and how much competition it faces. Where the partners live has no effect on what the business earns.

Option (1) Nature of business — A factor affecting goodwill. Products with high value added or stable demand bring more profits.

Option (2) Market situation — A factor affecting goodwill. A monopoly or limited competition lets the firm earn high profits.

Option (4) Efficiency of management — A factor affecting goodwill. Good management raises productivity and cost efficiency.

The recognised factor is the location of the business (central, with heavy customer traffic). NTA turned it into the location and address of the partners, which is not a factor at all. Read each option to its last word before you mark it.