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.