Question

how to calcultate goodwill?
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Answer 1

Understand how the average profits method is applied. Under this method, Goodwill is equal to the average profits for a set time period, multiplied by the number of years. 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.