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Corporate Accounting by V. Rajasekaran, R. Lalitha

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8

Valuation of Goodwill and Shares

LEARNING OBJECTIVES

After studying this chapter you should be able to:

  1. Define: Goodwill.

  2. Understand the nature and sources of goodwill.

  3. Appreciate the need for valuing goodwill.

  4. Understand the terms: future maintainable profit; normal rate of return; capital employed and average capital employed.

  5. Determine average capital employed under different methods.

  6. Value goodwill by average profits method; super profit method and capitalization method.

  7. Appreciate the need for valuation of shares.

  8. Value shares by intrinsic value method; yield method and fair value method.

  9. Understand “minority” and “majority” holdings.

  10. Explain the meaning of certain key terms associated with “Valuation of Goodwill and Shares”.

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