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Business valuation
purchase goodwill is a part of capital employed or not
In study material it's a part of capital employed but
same qus in praveen sir
notes is not a part of
capital employed
Replies (3)
I have also doubt in this point
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.
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thanks a lot sir
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