Goodwill Is an Asset That Arises Because the Present Value

question 20

Multiple Choice

Goodwill is an asset that arises because the present value of an acquired company's estimated future earnings, discounted at the acquiring firm's ROI:

• A)is less than the fair value of the net assets of the acquired company.
• B)is more than the fair value of the net assets of the acquired company.
• C)is more than the fair value of the net assets of the acquiring company.
• D)is less than the fair value of the net assets of the acquiring company.

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Definitions:

Owners' Equity

The total value that the owners or shareholders have invested in a company minus any liabilities the company has.

Assets

Resources owned by an individual or business with economic value expected to provide future benefits.

Liabilities

Financial obligations or debts that a company or individual is responsible for repaying.