Which of the following factors can affect the value of goodwill?
(A) Special advantages like import licences, low rate and assured supply of electricity, long-term contracts for supply of materials, well-known collaborators, patents, trademarks etc.
(B) Monopoly condition or limited competition.
(C) Management Efficiency
(D) Location
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A), (B), (C) and (D)
Goodwill is the value of a firm's reputation, the advantage that lets it earn more than a normal firm in the same business. Anything that raises the firm's expected profits raises its goodwill, so each item is checked against that test.
(A) Special advantages like import licences, low rate and assured supply of electricity, long-term contracts for supply of materials, well-known collaborators, patents, trademarks etc. Correct. These give the firm an edge its rivals do not have, such as cheaper inputs or a protected product, so its profits and its goodwill are higher.
(B) Monopoly condition or limited competition. Correct. This is the market situation. With few or no competitors the firm can earn high profits, which raises the value of goodwill.
(C) Management Efficiency Correct. A well-managed firm gets higher productivity at a lower cost. Higher profits follow, and so does higher goodwill.
(D) Location Correct. A business that is centrally placed or sits where customers pass in large numbers sells more, so its goodwill tends to be high.
The book lists one more factor, the nature of business, which the question leaves out.
NCERT (2026-27 edition):
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