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.

## Goodwill Formula

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 Definition

Goodwill is defined as the difference between the purchase price of a business and the fair market value of the business and its liabilities.

## Goodwill Example

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

## FAQ

**What is goodwill?**

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.