Intangible assets are those that are non-physical, however identifiable; and goodwill is designated as an intangible asset. Investors need to worry about goodwill when a company buys another company and is paying more than the fair market value of net assets. The value of goodwill often come from abstract and unreliable things, such as ideas and people, and neither of these can guarantee to work for a company forever. Moreover determining goodwill also involves loads to work around accounting conventions. Investors have to try hard when analyzing company fundamentals to get a sense of where the value of goodwill of company is coming from and where it might be going. All such accounting work leaves investors in a difficult position to determine the real worth of goodwill.
Thus, in my opinion goodwill is a negative sign when you are considering investing.
Get Answers For Free
Most questions answered within 1 hours.