False Asset Evaluation - Signs to Detect

False Asset Evaluation - Signs to Detect

Signs to detect

As an investor you should view any figure quoted for 'goodwill' with considerable mental reservation, especially if the given figure seems unduly high. Goodwill, being an insubstantial or intangible asset, having nothing in the way of 'hard' or material backing behind it, is obviously an item whose value is a matter of doubtful significance, indeterminate in its assessment. It is, moreover, an asset which cannot be disposed of for cash during the lifetime of the company. You can regard its inclusion on the balance sheet as functioning merely to swell the assets figure, and it indicates, in a consolidated balance sheet, that an amount for goodwill has been paid out in the acquisition of subsidiaries.

This concludes the item-by-item explanation of the balance sheet.


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