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Goodwill Calculator

Formula

The formula to calculate goodwill is:

$G = P - A - L$

Where:

$G$ is the goodwill ($)
$P$ is the purchase price of the business ($)
$A$ is the fair market value of the assets of the business ($)
$L$ is the fair market value of the liabilities of the business ($)

What is Goodwill?

Goodwill is defined as the difference between the purchase price of a business and the fair market value of the business and its liabilities. It represents the intangible value of a business, such as its brand reputation, customer relationships, and intellectual property.

Example Calculation

Let's assume the following values:

Purchase Price of the Business (P) = $1,000,000
Fair Market Value of the Assets (A) = $700,000
Fair Market Value of the Liabilities (L) = $200,000

Using the formula to calculate goodwill:

$G = 1,000,000 - 700,000 - 200,000 = 100,000$

The goodwill is $100,000.