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Definition of 'Goodwill'

Goodwill is an intangible asset that represents the value of a company's brand, customer relationships, and other intangible assets. It is often created when a company is purchased for more than the fair value of its net assets. Goodwill can be amortized over a period of up to 40 years.

Goodwill is a valuable asset for companies because it can help them to attract and retain customers, develop new products and services, and enter new markets. However, goodwill can also be a liability if it is not managed properly. Companies that have too much goodwill may find it difficult to generate enough cash flow to cover the amortization expense.

There are a number of ways to manage goodwill. One way is to focus on creating long-term value for customers. This can be done by developing new products and services, improving customer service, and building strong relationships with customers. Another way to manage goodwill is to sell off businesses that do not contribute to the company's overall value. This can help to reduce the amount of goodwill on the company's balance sheet.

Goodwill is an important asset for many companies. However, it is important to manage goodwill carefully to ensure that it does not become a liability.

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