Goodwill

This typically is the result of a buyout of a company that does not have many assets. For example, suppose a company has a book value (assets minus liabilities) of $10 million, but is purchased for $100 million. The difference between the two -- $90 million -- is considered goodwill. This amount must be charged against earnings for five to 40 years, and can be a drag on future earnings.

 

 

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