Companies often struggle with what is goodwill on a balance sheet. Goodwill is the difference between net tangible assets and liabilities. A company can only write off (remove) its own share of liabilities if it can prove that it has no control over the underlying assets and that they will not receive any benefit from them. But when an owner sells a company he does not walk away with cash in his pocket, rather he hands over a series of assets to the new owner in exchange for shares of stock or common shares in the company.
If you look at a balance sheet, you would see that all the different assets owned by the company are shown as liabilities. However, if you examine each of these individually, you would see that some of them may actually be performing better than the others (in the sense that they are not covered by default). Hence it is possible that the same assets can perform better individually, despite the fact that they belong to the same company.
However, it is possible to make the determination of what is goodwill per asset on your own. You need to add up the assets and then see what is their value. This is the level of profitability that the firm actually reaches (net profit – expenses). If the firm is not achieving the level of profitability that you expect, then you should go in for a change. A change in management would be the right way out.
However, what is goodwill per asset is an interesting concept that is difficult to quantify. This is mainly because there are so many different factors that go into the calculation. For instance, there could be a lot of difference in the net profits of two similar firms. One might be considerably larger than the other. Similarly, you might find that the firm has a high turn over rate, yet is not making much profit.
Then there are questions like how long a firm has been around. This might affect the calculation a little bit. But then, what is goodwill per asset will be irrelevant if the firm does not have a long history in business. If the firm has been around for decades, then the number should be high enough to be considered.
However, what is goodwill per asset is also affected by the stock holders. If there are fewer stock holders, then the asset might not be as liquid. This might help explain why there are some historical accounting tables that show what might be called the “book value” of a firm. The asset might be growing in value, but there might not be enough people to trade the shares and make the firm valuable. It would be wrong to conclude that what is goodwill per asset is determined by the book value, because it could also be growing or shrinking, depending on how the market price is doing.
Sometimes, what is goodwill per asset can be determined without actually looking at the historical performance of the firm. For instance, if the firm is growing, then there might be more net worth being realized. However, this might also imply that the firms future profits will probably be lower than the value that has been realized. So, instead of what is goodwill per asset being calculated, what is net worth might be used. Of course, what is goodwill per share will depend on what the company is worth.
One of the most important things to remember about what is goodwill per asset, is that it is an estimate. The actual amount will depend on what is actually happening with the firm. It might be growing, but its market value might be falling. It is up to you as the investor to make sure that whatever it is, that it is growing enough to justify your investment and to keep growing.