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Valuation Of Goodwill Interview Questions & Answers - Learning Mode
COOLINTERVIEW.COM CORPORATE ACCOUNTING INTERVIEW QUESTIONS VALUATION OF GOODWILL INTERVIEW QUESTIONS QUESTIONS & ANSWERS - LEARNING MODE

Valuation Of Goodwill Interview Questions & Answers - Learning Mode

Goodwill is the benefit and merit of good name and reputation. Goodwill refers to a measure of the capacity of a business to earn excess profit. Therefore, goodwill can be defined as an intangible asset of the business. Thus, goodwill may also be defined as "value of the reputation of business".

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Valuation Of Goodwill Interview Questions & Answers - Learning Mode
Try Valuation Of Goodwill Interview Questions & Answers - Exam Mode
Question: What is capitalization of super profit method?

Answer: The goodwill under this method is ascertained by capitalizing the super profits on the basis of normal rate of return. This method assesses the capital needed for earning the super profit.
Source: CoolInterview.com
Question: Name the methods of valuation of goodwill.

Answer: a) Average Profit Method
b) Super Profit Method
c) Capitalization of Average Profit Method
d) Capitalization of Super Profit Method
e) Annuity Method Source: CoolInterview.com
Question: How is number of years purchase determined?

Answer: The number of years of purchase is determined with reference to the probability of new business to catch up with an existing business.It will differ from industry to industry and from firm to firm. Normally the number of years ranges between 3 to 5. Source: CoolInterview.com
Question: What is goodwill?

Answer: The name and fame of an organization can be termed as goodwill. Goodwill is the benefit and merit of good name and reputation. Goodwill refers to a measure of the capacity of a business to earn excess profit. Therefore, goodwill can be defined as an intangible asset of the business.
Source: CoolInterview.com
Question: State the circumstances of valuation of goodwill.

Answer: (1) In the case of a partnership, when there is an admission, retirement, death or amalgamation, or a change in the profit sharing ratio take place,valuation of goodwill becomes necessary.
(2) In the case of a company, when two or more companies amalgamate, or one company absorbs another company, or one company wants to acquire controlling interest in another company or when the Government takes over the business, valuation of goodwill becomes necessary.
(3) In the case of a sole trader co Source: CoolInterview.com
Question: What is Average Profit Method?

Answer: Under this method the value of Goodwill is calculated by multiplying the Average Future profit by a certain number of year?s purchase.
Goodwill = Future maintainable profit after tax x No. of years purchase Source: CoolInterview.com
Question: What is capitalization of average profit method?

Answer: Under this method goodwill is ascertained by deducting Actual Capital Employed (i.e., Net Assets as on the valuation date) from the capitalized value of the average profits on the basis of normal rate of Return (also known as value of the firm or capitalized value of business).
Goodwill = Capitalised Value ? Net Assets of Business Source: CoolInterview.com
Question: What is an annuity method?

Answer: Under this method, goodwill is calculated by taking average super profit as the value of an annuity over a certain number of years.The present value of this annuity is computed by discounting at the given rate of interest (normal rate of return). This discounted present value of the annuity is the value of goodwill. The value of annuity for Rupee 1 can be known by reference to the annuity tables.
Source: CoolInterview.com
Question: What is Super Profit Method?

Answer: Super profit is the excess of estimated future maintainable profits over normal profits. An enterprise may possess some advantages which enable it to earn
extra profits over and above the normal profit that would be earned if the capital of the business was invested in some other business with similar risks.
The goodwill under this method is ascertained by multiplying the super profits by certain number of year?s purchase.
Super Profit = Average maintainable profits ? Normal P Source: CoolInterview.com
Question: State the factors affecting the value of goodwill?

Answer: a) Location
b) Time
c) Nature of Business
d) Capital Required
e) Trend of Profit
f) Efficiency of Management
Source: CoolInterview.com

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