The Implied Fair Value of Goodwill Is Calculated as the Difference

question 38

Multiple Choice

The implied fair value of goodwill is calculated as the difference between ________.

• A)the implied fair value of goodwill and its book value
• B)the fair value of the reporting unit (including goodwill)and the fair value of its net assets (without goodwill)
• C)the book value of the reporting unit (including goodwill)and the book value of its net assets (without goodwill)
• D)the fair value of the reporting unit (including goodwill)and the book value of the reporting unit (without goodwill)

---

Definitions:

Financial Leverage

The use of borrowed funds to finance the acquisition of assets, with the expectation that the income or capital gain from the assets will exceed the cost of borrowing.

Return on Equity

A measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.

Earnings per Share

A financial metric calculated by dividing a company's net income by the number of outstanding shares, indicating how much profit a company makes per share of stock.

Fixed Cost Sources

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.