Which of the following is not a method of valuation of goodwill?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Average super profit capitalization method
The main recognized methods of valuing goodwill are:
-
Average Profit Method
→ Goodwill = Average Profit × Number of Years’ Purchase -
Super Profit Method
→ Goodwill = Super Profit × Number of Years’ Purchase -
Capitalisation Method
-
(a) Capitalisation of Average Profit
-
(b) Capitalisation of Super Profit
-