Financial Glossary
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Goodwill
- An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company is purchased by another company. In an acquisition, the amount paid for the company over book value usually accounts for the target firm's intangible assets.
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Goodwill To Assets Ratio
- A ratio that measures how much goodwill a company is recording compared to the total level of its assets. The goodwill to assets ratio is useful for monitoring a company's use of goodwill. Although many companies record some form of goodwill, excessive use can lead to problems.
Goodwill to assets is calculated as:
Goodwill To Assets = Unamortized Goodwill / Total Assets
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Negative Goodwill
- A gain occurring when the price paid for an acquisition is less than the fair value of its net assets.
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