How is goodwill valued?
Goodwill takes into account the years of trading and the building up of key client relationships. A Company with an excellent trade name, solid reputation for quality and reliability and substantial key client accounts will have a far higher goodwill value than one only recently started up. Although there is no exact formula for goodwill, a total of three times net profit is often used. Be wary of Companies showing high levels of Goodwill, in an effort to balance their liabilities!
