Goodwill From Debt
DOI:
https://doi.org/10.17524/repec.v11i0.1718Keywords:
Goodwill, Goodwill from Debt, Equity Economic Value, Cash Consuming Unit, Generous Interest RatesAbstract
Objective: The objective in this study is related to the figure of Goodwill deriving from a company’s debt, that is, not the Goodwill normally originating in the intangible assets, which can produce abnormal profitability and which lead to the value of the company’s going-concern being higher than the algebraic sum of its equity elements’ fair values. This view may be considered a novelty to many, that is, the Goodwill deriving from a company’s debt instead of its assets. Some companies are not even able to remunerate the risk their Assets entail, but may present Goodwill due to the form in which their assets are funded. Method: In this essay, basic concepts and formulations are presented which are normally used in company valuation. Next, simulations are shown that objectively demonstrate the true technical sense of this formulation. Results: Knowing that some public development agencies and the BNDES itself end up funding certain activities with generous interest rates, in this study, an actual case of Goodwill from debt in a Brazilian company is discussed. Contributions: One of the main contributions in this essay is the exposition of a theme that is practically unknown in the academic world and completely ignored in accounting standards and legislations, but present in the world of better prepared analysts and investors, which is due to the non-dissemination of this concept in a form and writing that is accessible to all levels of readers.References
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