Question

Write any four factors which affect the goodwill of a partnership firm.

Answer 1

1. Favourable location of the business: If a business is located in a convenient or prominent place, it attracts more customers and increases goodwill.
2. Efficiency of management: If a business is managed by experienced and efficient managers, it can earn higher profits consistently, which increases the overall value of its goodwill.
3. Risk involved: If there is a higher level of risk in the business, the value of its goodwill decreases.
4. Future competition: If there is a possibility of increased competition in the future, it will reduce the value of goodwill.