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When an acquisition occurs, the difference between the Net Assets or Book Value and the Purchase Price Paid is the Goodwill. Goodwill is considered to have infinite economic value.

The value of the Goodwill on the Balance Sheet is expressed in the economic value of the Intangible Assets, assets that cannot be touched. The concept of Goodwill is fairly easy to follow. If an asset or subsidiary or a whole company is purchased, there is a Market Value or Fair Value placed on the Net Assets or Book Value of the acquisition. The difference between the Net Assets and the Purchase Price Paid is the Goodwill, which can be expressed in the following formular.

Goodwill = Price Paid – (Total Assets – Liabilities)

Therefore, the concept of Goodwill exists and it can be a very important component or motivation behind the acquisition. Goodwill represents the value of a Company’s reputation built up over many years as symbolised in a Brand Name or Identity. This can be attributed to several factors. The company’s client base, Copyright Assets, Patents, the Trademarks of a Company, proprietary technology, all represent some reasons why Goodwill exists. Goodwill is considered to have an indefinite economic value. Most other Intangible Assets are considered to have a finite economic value.


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Warren William

Meet the author behind Smartest-Data. Warren William has a career in Finance and Investments extending over 35 years, both on the Buy Side and Sell Side. His most recent roles include, developing Institutional Risk Management Programs for managing Equity and Fixed Income Risk.  Prior to this Warren William work in Alternative Investments, in Investment Management and as a Buy Side Equity Analyst. Warren William brings a wealth of knowledge and expertise to the table, providing in-depth analysis and commentary on the latest trends in the Stock Markets. Contact information: or Telegram +393339034488

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