Don't let goodwill blow up in your face

Article Abstract:

Goodwill is a contentious area in terms of corporate accounting practices and goodwill was dealt with more leniently in Britain than in the US Goodwill includes people, brands and intellectual property. The Financial Reporting Standard 10 has brought in more stringent rules relating to goodwill, and previous rules may have meant that unwise acquisitions were carried out. The effectiveness of the new rules is still unclear, and investors should be cynical about what companies seek to persuade them to believe.

Analysis, Financial management

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Adding up a company's value needs goodwill

Article Abstract:

The concept of goodwill in corporate accounting relates to the difference between investments in a corporation, excluding losses and debts, and the value of the corporation. The value of a company depends on future earnings, hence the importance of goodwill. Companies may have zero net assets and still be worth a great deal because of goodwill. Goodwill is important when stocks are purchased as well as on balance sheets, and is a concept used by all investors.

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Return on equity made simple

Article Abstract:

Return on equity calculations can involve subjectivity. Low returns on capital are less desirable than high returns, but adjustments are needed to calculate the returns, such as those made relating to goodwill and research spending. Ecnomic value added (EVA) analysis can involve more than 160 adjustments to equity equivalents to assess economic returns rather than accounting returns. EVA aims to assess the extent to which companies use capital profitably.

Profit, Profits, Return on investment, Rate of return

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