Which of the following is not a factor affecting goodwill value of the firm ?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Capital contribution by a competitor
Goodwill is the value of a firm’s reputation and its power to earn more than normal profits, so it depends on things that raise the firm’s own profits. Capital put in by a competitor is outside the firm and does nothing for its earnings, so it is not a factor.
Option (1) Nature of business — A factor affecting goodwill. High value added products or a stable demand bring more profit and more goodwill.
Option (2) Location — A factor affecting goodwill. A central place with heavy customer traffic raises goodwill.
Option (4) Special advantages — A factor affecting goodwill. Import licences, patents, trademarks or assured supplies give the firm an edge over others.
NCERT (2026-27 edition):
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