What are the factors affecting goodwill?

Factors Affecting Goodwill

The following are the important factors that affect the goodwill of a firm.

1) Quality Products: If a company produces product of the best quality and in large scale, then automatically the company earns more goodwill.

2) Location: If a business is located at easily reachable and convenient place, then more number of consumers will be attracted again and again which will lead to increase in sales and, therefore, the firm will earn higher goodwill.

3) Management: Efficient management leads to cost efficiency and increases productivity. If a firm’s management is efficient, then superior quality products can be produced at lower cost .These can be sold at lesser price. Superior quality at lower price enables a firm to earn higher goodwill.

4) Market Structure: If a firm is operating in a monopoly market with no close substitutes, then there will be more goodwill of the firm.

5) Economies of Scale: If a firm enjoys special advantages like, continuous supply of power, fuel and raw materials at a low price and produces quality product at a large scale, then the firm enjoys higher value of goodwill.

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