What are the main factors affecting the value of goodwill?
(A) Nature of business
(B) Location
(C) Efficiency of management
(D) Market situation
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 worth more when a firm can expect to keep earning above-normal profits, so anything that raises those expected profits raises goodwill.
(A) Nature of business Correct. A firm with high value-added products or stable demand earns more and has more goodwill.
(B) Location Correct. A central place or one with heavy customer traffic brings more sales.
(C) Efficiency of management Correct. Good management means higher productivity, lower costs and higher profits.
(D) Market situation Correct. Monopoly or limited competition lets the firm earn high profits.
NCERT (2026-27 edition):
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