ABSTRACT

However, “ unless a present or prospective future earning power or capacity larger than that of a newly established com­ peting concern goes along with these elements, no one would be willing to pay anything for the goodwill of the old concern. Dormant or latent goodwill signifies the excess earning power that would exist, if it were not for poor management. The prob­ ability of the continuance of this advantage is the basic element in the valuation of goodwill” (Kester). “ To have a sales value, goodwill should represent a substantial earning power in excess of ordinary interest on capital and the management salaries combined. The plea of bad management is overworked. Goodwill never attaches to a business which is not believed to possess possibilities of being made profitable” (Montgomery).