What is Goodwill?
Goodwill: Extra value paid in an acquisition above the worth of identifiable assets.
Where Goodwill fits
Goodwill is part of Valuation & Deals in Finance. Valuation estimates what a business is worth. Mergers and acquisitions are checked by due diligence, and present value converts future cash into today's money.
Practical tip
Never pay more than discounted future cash, and verify claims before signing.
Related terms
- Due diligence
- Careful checking of a deal before committing.
- Merger
- Two companies join to form a single new one.
- Acquisition
- One company buys control of another.
Formulas you will use with it
Test yourself
Which term means: “Extra value paid in an acquisition above the worth of identifiable assets.”?
Due diligence · Goodwill · Acquisition
Answer: Goodwill
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