Goodwill to Assets Ratio

Calculate Goodwill to Assets Ratio

Goodwill ($)

Total Assets ($)

Results

Ratio

Percentage

Assessment

Interpretation

Understanding Goodwill to Assets Ratio

Formula

Goodwill to Assets Ratio = Goodwill ÷ Total Assets

What is Goodwill?

Goodwill represents the premium paid for a company above its fair market value during an acquisition. It includes intangible assets like brand recognition, customer relationships, and intellectual property that cannot be separately identified.

Interpretation Guidelines

Low (0-10%)

Conservative asset base with minimal acquisition premiums

Moderate (10-20%)

Balanced approach with reasonable acquisition activity

High (20-30%)

Significant acquisition activity, requires scrutiny

Very High (>30%)

Potential overvaluation risk, impairment concerns

Key Considerations

Industry norms vary significantly (tech vs. manufacturing)
Higher ratios may indicate aggressive acquisition strategies
Monitor for potential goodwill impairment charges
Compare with peers in the same industry
Consider the age and source of goodwill
Evaluate management's track record with acquisitions

Example Calculation

Company A has goodwill of $500 million and total assets of $2.5 billion:
Goodwill to Assets Ratio = $500M ÷ $2,500M = 0.20 or 20%
This indicates moderate acquisition activity requiring monitoring.