Which of the following factors does not affect the value of goodwill?

The correct answer is Option (3) → Fiscal Policy of Government

Goodwill is the value of a firm's ability to earn more profit than other firms in the same business. So the factors that affect it are the firm's own strengths that bring in extra profit.

• Option (1) Location of the business — A factor affecting goodwill. A central place or one with heavy customer traffic brings more customers and more profit.

• Option (2) Efficiency of the management — A factor affecting goodwill. Good management gives high productivity and low cost, and so higher profit.

• Option (4) Patents of the company — A factor affecting goodwill. Patents are a special advantage that protects the firm from competition and raises its profit.

Fiscal policy of the government (its taxes and spending) applies to every firm in the economy alike. It gives no firm an edge over its rivals, so it is not a factor that decides the goodwill of a particular firm.