How can we calculate the goodwill.
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This is the simplest and the most common method to calculate goodwill. To summarize the formula: Goodwill = Average Profits X Number of Years. For example, if you used the average annual profits of the years 2010-14, you would multiply the average by 5.
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Answered by
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Goodwill may be determined as a multiple of the extra earnings by the specific number of future years (The multiplier).
➡Goodwill Based on a multiple of the average earnings.
➡Goodwill Based on the Capitalized Value of the Extra Earnings.
➡Goodwill Based on a Multiple of the Extra Earnings.
➡Arbitrary Value of Goodwill.
Explanation:
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