what is goowill? when buying a shop. must it be paid,how is it calculated?

Answer 1

goodwill - it is an intagible asset -
Goodwill is an asset that is created when one company acquires another. It represents the difference between the price the acquiror pays and the "fair market value" of the acquired company's assets. For example, if JerryCo bought Ford Motor for $15 billion, and the accountants determined that Ford's assets (plant and equipment) were worth $13 billion, $2 billion of the purchase price would be allocated to goodwill on the balance sheet. In theory the goodwill is the value of the acquired company over and above the hard assets, and it is usually thought to represent the value of the acquired company's "franchise," that is, the loyalty of its customers, the expertise of its employees; namely, the intangible factors that make people do business with the company.

What is the effect on book value? Well, book value usually tries to measure the liquidation value of a company -- what you could sell it for in a hurry. The accountants look only at the fair market value of the hard assets, thus goodwill is usually deducted from total assets when book value is calculated.

For most companies in most industries, book value is next to meaningless, because assets like plant and equipment are on the books at their old historical costs, rather than current values. But since it's an easy number to calculate, and easy to understand, lots of investors (both professional and amateur) use it in deciding when to buy and sell stocks.

Answer 2

Goodwill is the excess of the value of a business over the value of its net tangible assets. Contributing factors to goodwill are; established markets, personnel and other intangibles.
When buying a shop, goodwill is a matter of negotiation, there are no pre-determined rules.
To estimate the value of goodwill, take the average profit if the shop for the last three years, deduct the market cost of employing anyone who currently receives a profit share and one then has a value for the annual 'Real Profit' of the business.
A reasonable value for goodwill could be three times this amount and one would often expect the payment for this to be spread over(say) 2 - 3 years.
This is a rough estimate and will be affected by the tenure of the premises, specialist knowledge of the existing proprietor and any external factors that could have a bearing on the ongoing revenue.

Answer 3

Goodwill is often used to hike a price for a shop. You need to consider if the goodwill includes a contact list of customers, then it may be worth it. If however your shop will remain selling the same products as before, and relies of customers walking past then you are in a strong position to reduce the price. Use the money saved on goodwill for advertising, well worth it.

Answer 4

excess of bid over market price (exists 2 make share holders sell 2 enable take over)