A purchaser is willing to pay for goodwill when they feel the company they are buying has abnormal earning power.

Question

Quizplus · Accepted Answer

Goodwill is the premium paid by a purchaser for the expected future earnings power of a company, and is usually only paid when the purchaser believes that the company has abnormal earning power or other intangible assets that are not reflected on the balance sheet. Therefore, a purchaser would be willing to pay for goodwill if they believe the company has abnormal earning power.

A Purchaser Is Willing to Pay for Goodwill When They