Enter the purchase price of a company, the fair market value of its assets, and the fair market value of its liabilities to determine the goodwill.
The following formula is used to calculate a goodwill value.
G = P-A-L
- Where G is the goodwill ($)
- P is the purchase price of the business ($)
- A is the fair market value of the assets of the business ($)
- L is the fair market value of the liabilities of the business ($)
Goodwill is defined as the difference between the purchase price of a business and the fair market value of the business and its liabilities.
How to calculate good will?
- First, determine the purchase price of the business.
For this example we will say the business is purchased at $100,000.00
- Next, determine the value of the assets and liabilities associated with the business.
For this example we will say it as $50,000.00 worth of assets and $10,000.00 worth of liabilities.
- Finally, calculate the goodwill.
Using the formula we find the good will to be $40,000.00
A good will is the theoretical value of an intangible asset associated with a company. For example, the “brand value” could be considered goodwill because it is not a tangible asset that can be bought or sold, but could hold intrinsic value if many people believe that brand to be good or trustworthy.