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Goodwill refers to the capacity of a business to earn normal profit.it is the benefit and advantage of a good name, reputation and connection of a business. It is a kind of pull which brings in customer.
It is invisible and intangible fixed assets, however Goodwill gets value only if the business is profitable.
In easy words, we may also refer Goodwill as popularity or reputation of a business resulting from quality production, punctuality, social responsibility, harmonious relationship with labour, dealer and customer integrity and honesty. Goodwill can be converted into cash at the time of sale of business or dissolution of firm.
NATURE OF GOODWILL
Nature of goodwill depends upon and affected by the nature of customers which may be described as below:
a) Cat natured Goodwill
as like the name says, cat natured Goodwill inherits the tendency of cats. As like cats have tendency to live on its place even if the owner of the place changes.cat will remain on same place. Likewise goodwill of a business is such that, it would never finishes, even if it’s owners changes.
The value of this type of goodwill is very High, because every buyer wants to have a business which has High goodwill. Goodwill doesn’t effect with any change of employees, owner, vendors, dealers etc.
b) Dog natured goodwill
As the name says, dog natured goodwill inherits the tendency of dogs.
Dogs are the most loyal and trustworthy friends.
Likewise, dogs follows instructions of his master, wherever he is in whatever condition, he is, thus goodwill of this nature, remains with its owners, not with the business firm, thus goodwill is having tendency of dog.
Value of dog natured Goodwill is very less, because the value of business firm will not remain same, if owner of business changes and thus, no buyer would ever be interested to buy such business firm.
c) Rat natured Goodwill
As the name says, this type of goodwill inherits it’s nature from rat, as like, rat doesn’t remain consistent on same place and runs here and there, likewise, the nature of goodwill is quite uncertain, and is not fixed but fluctuates from time to time. This type of goodwill is not considered as reliable and possess very low value or at times doesn’t have any value.
GOODWILL OF STRANGE NATURE
Well, as the name says, strange means the tendency or behaviour of such type of goodwill is very strange, here’s an example to develop a better understanding of this below:-
Many people visit a shop to buy certain goods, not because it is popular instead, they go, In order to show off, or kind of bragging off their status, they go there their so that their reputation increases and they can see the charm of fashion and market. Even they buy their expensive goods and services, abiding by all terms and conditions.
Therefore, the goodwill of a shop or certain business of such type remains till the condition is in favour of them,(presently, pharma sector, life/health and term insurance, sanitizer etc)
Thus, value of goodwill, depends upon such inconsistent conditions.
And likewise, when conditions are finished, people stop visiting particular shop.
So, here’s the list of types of goodwill that a business posses.
Do mention the best nature of goodwill! In the comment section below.
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explained in an amazing way 👌👏