Practicing Success
Select the Factors affecting the value of goodwill of a firm from the following. (A) Financial Soundness of Employees employed in the organisation. Choose the correct answer from the options given below. |
(A), (B) and (C) only (B), (C) and (D) only (C), (D) and (E) only (A), (C) and (E) only |
(B), (C) and (D) only |
The correct answer is Option (2) → (B), (C) and (D) only Goodwill is an intangible asset that represents the reputation, brand value, customer loyalty, and other non-physical assets of a business. The value of goodwill is influenced by several key factors, which can be summarized as follows: * Nature of Business: Businesses engaged in the production of high-value products or those with stable and consistent demand tend to generate more profits. Consequently, such firms typically possess a higher level of goodwill. * Location: The geographical location of a business can significantly impact its goodwill. A centrally located business or one situated in an area with heavy customer foot traffic is likely to have a greater goodwill value. * Efficiency of Management: Well-managed businesses often achieve higher levels of productivity and cost-efficiency. This efficient management translates into increased profits, thereby contributing to a higher valuation of goodwill. * Market Conditions: The competitive landscape and market conditions play a vital role in determining goodwill. Firms operating under monopoly conditions or facing limited competition often have the opportunity to earn substantial profits, resulting in a higher goodwill value. * Special Advantages: Businesses that enjoy special advantages, such as exclusive import licenses, access to low-cost and reliable electricity, long-term contracts for essential materials, established collaborations, and ownership of patents and trademarks, are positioned to command a greater value of goodwill. |