What is goodwill in accounting? It is essential to understand what is goodwill in accounting. Generally the value of a company is calculated based on the value of its assets minus the amount of its liabilities. However, the actual value of a company is so much more than that. There are assets that a company builds or acquires that make it very valuable over and above the calculated value. Some of these assets are the customer base, brand recognition, talent of the human resources and intellectual property. When the purchase price of a company is more than the calculated value due to its intangible assets, this is called goodwill. This is evaluated annually and since it does not have a definite lifespan it may or may not be amortized based on the accounting standards that are being followed. Importance o...

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What is profit before tax? Profit before tax or PBT is the gross profit that a business earns before income tax is applied. Other names of profit before tax include pre-tax profit and earnings before tax or EBT. The profit before tax value is found on the income statement which is generated either quarterly, half-yearly, or annually. The profit before tax value is used to determine how much tax the business has to pay based on its income. The profit before tax value is calculated based on a formula that takes into account the total revenue, operating expenses, interest expenses, and cost of goods sold. Significance of profit before tax Profit before tax allows you to know and evaluate your profit margins. Profit margins allow you to understand the effectiveness of your ability to turn your revenue in...

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