The Balance Sheet: Goodwill

open book 100x100 The Balance Sheet: GoodwillTo understand a balance sheet requires that we understand every line item, what each means, and how it can be manipulated. Today we are going to look at the line item for Goodwill.

Goodwill Definition

Goodwill is one of the most commonly misunderstood line items in the balance sheet, I once met a junior investor who thought that Goodwill was the amount of money that the company had donated to charitable organizations. This unfortunately is not the case, goodwill, simply put, is the byproduct of two companies merging.
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Graham Security Analysis (Session 1)

benjamin graham 200x200 Graham Security Analysis (Session 1) Benjamin Graham had a great investment philosophy. Find great companies determine their intrinsic value and then only buy them when they are cheap. Or as Graham puts it: 

apply a set of standards to each purchase, to make sure that he obtains (1) a minimum of quality in the past performance and current financial position of the company, and also (2) a minimum of quantity in terms of earnings and assets per dollar of price.

The Intelligent Investor P347-348 Harper Collins Edition 2003
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