Financial Terms Glossary

Goodwill

Formal

The excess of the purchase price paid for an asset or business over its stated book value. Or, put another way - it's the same as the value of a good relationship that a business has with its customers that is regarded and assessed as an intangible asset.

Informal

ABC limited has assets worth $2 Million. XYZ limited buys ABC for $3 Million because of its future profit stream. So $3 Million has been paid for a company (apparently) only worth $2 Million - the $1 Million difference or premium is the Goodwill.

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