Time value of money(TVM) is one of the most important part of financial management. To understand this concept, let’s take an example..suppose that your client who owes you 1000$ gives you an option that either he can pay you this money today or after 3 months. Obviously you would be more interested in getting this amount today because an amount of cash available today is more valuable than the same amount of money available in future. But why so..? The reason is simple… money earns interest over time, so it…

# Month: March 2015

## what is the need for the valuation of goodwill?

The valuation of the Goodwill of a sole proprietorship is done when the business is being sold, but in case of a partnership firm and a joint stock company goodwill can be sold to some another business entity without selling the whole business. Hence when you are going to sell the goodwill of your business, you should be assured of the value of your goodwill at that particular time. In case of a Partnership firm, there is a need for the valuation of Goodwill of the Firm in the following…

## Methods of Valuation of Goodwill – Weighted Average Profit Method

Weighted Average Profit Method The Weighted Average Profit Method is an improvement over Simple average Profit Method. Under this method Weights are assigned to each year’s profit.For calculating Goodwill, the Profits of each year are multiplied with the respective weight assigned to that particular year. Usually more weightage is assigned to recent years. The product of the profits with weights is added. This sum of products is then divided by the total number of weights. This method is suitable in case of a rising trend of profits. Formula: Weighted Average…