Identify the factor that does not affect the value of goodwill of a partnership firm.

Change in the profit sharing ratio of partners

The correct answer is option 1- Change in the profit sharing ratio of partners.

Change in the profit sharing ratio of partners does not affect the value of goodwill.

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.