Business valuation

Analysis

1) Capital Employed  may be calculated by following both ways :

Capital Employed = Paid up share Capital + Reserves & Surplus + Long term Liabilities

OR

Capital Liabiliites = Total of Assets- Current Liabilities

2) Goodwill is appearing in the balance sheet that means it must be purchased goodwill . Since,  self generated goodwill is not to be recognized in the Balance Sheet.  Goodwill is an intangible asset.   Therefore, this item will be included in Total Assets.

Conclusion

From the above discussion, it is clear that purchase of goodwill  will form a part of Capital Employed.

-QLI

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