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BRILLIANT’S Long Term Financing and Valuation of Goodwill & Shares 213

63.997
Therefore, weighted average rate of earnings   10.67%
6
(b) Computation of Average Annual Profit Available to Equity Shareholders
Particulars `

Average maintainable profit i.e. 10.67% on ` 11,25,000 1,20,000
Less: Depreciation and replacement reserve @ 25% on ` 1,20,000 30,000
Preference dividend @ 9% on ` 1,50,000 13,500 43,500
Average annual Profit available to Equity Shareholders
(excluding income on investment) 76,500

(c) Ascertainment of Capitalized Net Worth
Particulars `

Capitalized value at the expected rate of return: ` 76,500/0.09 8,50,000
Add: Total value of investments 1,40,000
Net Assets available to equity shareholders (excluding income on investment) 9,90,000

` 9,90,000
(d) Value of each equity share = = ` 198 
5,000

VALUATION OF GOODWILL / JwS>{db H$m d¡ë¶yEeZ

Q.24. What is Goodwill? What are the distinguishing features of Goodwill?
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OR
State the methods of accounting for Goodwill. / JwS>{db Ho$ {bE AH$mC§qQ>J H$s {d{Y¶m± ~VmB¶o&
OR
What are the important features of "purchased" and "self generated" Goodwill?
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Introduction n[aM¶

Goodwill is nothing more than the prob- JwS>{db Hw$N> Zht h¡ Ho$db EH$ g§^mdZm h¡ {H$ nwamZo
ability that the old customers will resort to the J«mhH$ nwamZo ñWmZ na {Q>Ho$ ah|Jo& à˶oH$ ì¶mnmar CgH$s
old place. Every businessman tries to establish JwS>{db ñWm{nV H$aZo H$m à¶mg H$aVm h¡ ³¶m|{H$ ¶h Cgo
his Goodwill because it enables him to earn
more profit. Following are some of the impor- A{YH$ bm^ H$‘mZo ‘| gj‘ ~ZmVr h¡& JwS>{db H$s Hw$N>
tant definitions of Goodwill: ‘hÎdnyU© n[a^mfmE§ ZrMo Xr J¶r h¢…
1. "Goodwill is the present value of a firm's 1. ''JwS>{db EH$ g§ñWm Ho$ AZw‘m{ZV A{V[a³V A{Zª½g
anticipated excess earnings." - Morrisey H$m dV©‘mZ ‘yë¶ h¡&'' - Morrisey