below poverty line.
State any two factors affecting the value of goodwill of the firm. Also, identify any two values
which the firm is trying to propagate.
{CBSE, Delhi Comptt
Q. 6. Suraj and Dilip are partners in a firm dealing in stationery items. The firm is well managed and
enjoys the advantage of being cost effective. It buys stationery items at reasonable cost from
Dilip's relative, who is a manufacturer of stationery items. The firm's sales outlet is situated near a
school. As a result, the firm has a steady demand of stationery items and is earning good profits.
The firm is donating 10% of its profits to the near by school for the education of the students of
Answers
Answer:
Factors Affecting the Value of Goodwill (7 Factors)
Locational Factor: If the firm is centrally located or located in a very prominent place, it can attract, more customers resulting in an increase in turnover. ...
Time Factor: ...
Nature of Business: ...
Capital Required: ...
Trend of Profit: ...
Efficiency of Management: .
Two factors affecting the value of Goodwill of the firm:
1. Capital Required:
When the profits of the business is higher compared to the investment of the company, the value of goodwill is higher than the business earning less amount of profits compared to its capital.
2. Management Efficiency:
Management efficiency leads to earning of higher profits, which increases the value of goodwill of the firm. This efficiency is reached through planned production, proper distribution of goods, and services provided by the firm. When the management is able, competent and efficient, goodwill of the firm increases.
Explanation: