Great explanation of goodwill, you made a good point when you said " goodwill cannot pay off a company debt ". Keep up the great work Hamish, your videos are solid 👍
Very interesting! I'm researching a company right now whose total assets on its' balance sheet continues to decline. However, their Goodwill remains fairly stable. At first, their Goodwill was about 15% of total assets, but as total assets have declined, Goodwill now makes up about 25% of the balance sheet. I'm not sure what's normal or abnormal percentage wise, but it seems precarious that 25% of a company's balance sheet could be wiped out at any time with a Goodwill impairment.
1. Intangible assets have gotten more valuable recently 2. Goodwill looks to be meta for businesses 3. Goodwill is helpful for managing businesses in different niches
Great video. I realized I'm missing something when I researched Kraft Heinz and all there numbers were excellent Rule 1 style. The only reason I didn't buy it was because it was slightly above the buy price... And then it crashed big time and everyone was saying they have too much debt. I thought how's that possible with equity to debt of 0.5? That's when I first realized what Goodwill does. So this video I'm sure it will help others a lot!
Nice one Hamish. Beat me to the punch. I was going to post a video on goodwill on my channel but will just link yours if it is relevant in any new posts. High levels of goodwill increase the level of risk when investing in a company so I tend to avoid even bothering with those stocks. There are plenty of other well managed companies to research and possibly invest in.
Awesome job; it seems like you are taking the Ben Gram approach to Goodwill by ignoring it. However, I refer you to The Essays Of Warren Buffett by Lawrence Cunningham. There he shares Warren's advice on how investors should view Goodwill, especially the difference between Goodwill and what he calls Economic Goodwill. It's an extremely insightful lesson.
Hello Hamish, Could you please be so kind and share your opinion on this: If a company did a huge Intagible impairment, therefore it is making negative effect on income statement and mostly, net income is negative due to impairment, However, the sales itself as well as gross magin is positive as in previous quarters, Coudl you please just share theoretical opinion how this quarter fin statement results would impact the stock market by your experience after its release? , Negative net income is a bad sign or since it is due to intangible - it is not so bad? Thanks, regards,
Great video! How does it work from the point of sale of assets? How is the goodwill portion taxed vs the tangible/equipment portion of the sale of a small business? Say, the sale price is 100K, with goodwill being 60K and equipment 40K. From what I understand goodwill is considered capital gains.Thanks again!
Hi Hamish, I wonder if you would have any insight on how to decipher the difference when the same company is listed on the stock exchange but in different countries e.g. .ax and .to . Do you look at the numbers are they the same company essentially? the numbers on two different listings look different...
Great question. The share price can also differ massively. I think that's because there could be a high demand for shares in one country pushing the price up. At the same time I believe it's not that simple for a broker to take shares from let's say Australia and convert them to shares in the UK to pocket the difference. However, I have no explanation why the other numbers that are reported would be different...
Hi Hamish, was wondering if Goodwill only comprises of value that is linked to the Brand Value of a company. ie Knowhow and expertises would NOT be considered as a GOODWILL?
Example, if a company was worth 100, but sold for 90. Negative goodwill is called badwill. If equity is 100. You need to explain why it was sold for less than equity in the accounting sheets, therefor negative goodwill or aka badwill.
Thanks Mr 26%! Good video, however, I disagree with you. As a long term investor beware intangible assets and especially goodwill. Impairment is only used when it is impossible place a fair value on an asset, because it exceeds that fair value amount. So it is open to interpretation, manipulation and fraud. Look to the footnotes of any annual report, for how something is being Amortised or depreciated. The writing off or impairment of intangible assets, is open to interpretation. For example, what price do you put on a room full of techies? How long is their shelf life and of all their kit.? You are talk of worrying about goodwill being impaired over too short a time, well the opposite is more likely to happen. If you depreciate the intangible asset, of a room full of techies, over 20 years at say 3% rather than say 5 years at 15% then this will directly inflate your earnings. Look over a number of years, to see for fluctuations in how thing are being assessed. Look to see if they keep re assessing assets. Good video though
@@tedyrusu9959 Yeah, if you listen carefully. You can hear that it uses the same beat. It isnt the actual song, because that is trademarked, but it is derived from it.
Great explanation of goodwill, you made a good point when you said " goodwill cannot pay off a company debt ". Keep up the great work Hamish, your videos are solid 👍
Case in point Kraft heinz q4 2018.
This video was simple, easy to understand, and helped me so much ! thank you ! making my life easier !
Thanks that you have explained the term goodwell and I want you to explain how good will and premium are treated in the balance sheet
This is probably a good reason for why the Intelligent Investor recommends avoiding serial acquirers :) Great video!
Good point!
Ben Graham also made frequent reference to tangible book value.
thanksss just subscribed cuz u explained it well! keep going! :D
Thank you for all the explanations🙏
Very nice explanation. I wish the video was around when I was first trying to learn about stocks!
On an unrelated point, how did u get 4000+ subscribers without any videos?
Solid Video!! Thanks for this!!
great explanation, thanks
thanks hamish ! much appreciated!
great vid. quick question: after A purchases B for 80 mill, the 10 mill of goodwill shows on ... B's balance sheet? if not, why would it show on A's?
Very interesting! I'm researching a company right now whose total assets on its' balance sheet continues to decline. However, their Goodwill remains fairly stable. At first, their Goodwill was about 15% of total assets, but as total assets have declined, Goodwill now makes up about 25% of the balance sheet. I'm not sure what's normal or abnormal percentage wise, but it seems precarious that 25% of a company's balance sheet could be wiped out at any time with a Goodwill impairment.
Do credit analysts adjust goodwill out of the balance sheet when doing credit analysis of their borrower?
1. Intangible assets have gotten more valuable recently
2. Goodwill looks to be meta for businesses
3. Goodwill is helpful for managing businesses in different niches
Great video. I realized I'm missing something when I researched Kraft Heinz and all there numbers were excellent Rule 1 style. The only reason I didn't buy it was because it was slightly above the buy price...
And then it crashed big time and everyone was saying they have too much debt. I thought how's that possible with equity to debt of 0.5? That's when I first realized what Goodwill does. So this video I'm sure it will help others a lot!
Nice one Hamish. Beat me to the punch. I was going to post a video on goodwill on my channel but will just link yours if it is relevant in any new posts. High levels of goodwill increase the level of risk when investing in a company so I tend to avoid even bothering with those stocks. There are plenty of other well managed companies to research and possibly invest in.
Great explanation
Nice video. Book value is an inconsistent measure for some companies because goodwill and other intangible assets distort it.
Nice! Thanks for this video :)
Great video, son
Good video
Awesome job; it seems like you are taking the Ben Gram approach to Goodwill by ignoring it. However, I refer you to The Essays Of Warren Buffett by Lawrence Cunningham. There he shares Warren's advice on how investors should view Goodwill, especially the difference between Goodwill and what he calls Economic Goodwill. It's an extremely insightful lesson.
Hello Hamish, Could you please be so kind and share your opinion on this: If a company did a huge Intagible impairment, therefore it is making negative effect on income statement and mostly, net income is negative due to impairment, However, the sales itself as well as gross magin is positive as in previous quarters, Coudl you please just share theoretical opinion how this quarter fin statement results would impact the stock market by your experience after its release? , Negative net income is a bad sign or since it is due to intangible - it is not so bad?
Thanks,
regards,
Do you have any videos on mergers and amalgamations?
Nice
Helpfull thanks
Great video! How does it work from the point of sale of assets? How is the goodwill portion taxed vs the tangible/equipment portion of the sale of a small business? Say, the sale price is 100K, with goodwill being 60K and equipment 40K. From what I understand goodwill is considered capital gains.Thanks again!
Hi Hamish, I wonder if you would have any insight on how to decipher the difference when the same company is listed on the stock exchange but in different countries e.g. .ax and .to . Do you look at the numbers are they the same company essentially? the numbers on two different listings look different...
Great question. The share price can also differ massively. I think that's because there could be a high demand for shares in one country pushing the price up. At the same time I believe it's not that simple for a broker to take shares from let's say Australia and convert them to shares in the UK to pocket the difference. However, I have no explanation why the other numbers that are reported would be different...
Goodwill is on the balance sheet of the company that bought or sold?
Please do the manufacturing account
What does learns to be brief, because brevity wins the goodwill of other members means?
what if a firm wants to let a shop however they don't want to buy the brand/pay for goodwill
Hi Hamish, was wondering if Goodwill only comprises of value that is linked to the Brand Value of a company. ie Knowhow and expertises would NOT be considered as a GOODWILL?
What if the goodwill is in negative? Eg. Reliance acquiring Revlon
Example, if a company was worth 100, but sold for 90. Negative goodwill is called badwill.
If equity is 100. You need to explain why it was sold for less than equity in the accounting sheets, therefor negative goodwill or aka badwill.
what happen when a Company write of good will does the company stock will get diluted
Thanks Mr 26%! Good video, however, I disagree with you.
As a long term investor beware intangible assets and especially goodwill. Impairment is only used when it is impossible place a fair value on an asset, because it exceeds that fair value amount. So it is open to interpretation, manipulation and fraud.
Look to the footnotes of any annual report, for how something is being Amortised or depreciated. The writing off or impairment of intangible assets, is open to interpretation. For example, what price do you put on a room full of techies? How long is their shelf life and of all their kit.? You are talk of worrying about goodwill being impaired over too short a time, well the opposite is more likely to happen. If you depreciate the intangible asset, of a room full of techies, over 20 years at say 3% rather than say 5 years at 15% then this will directly inflate your earnings. Look over a number of years, to see for fluctuations in how thing are being assessed. Look to see if they keep re assessing assets.
Good video though
What's this soundtrack you use on many of your videos, it's brilliant, would u mind sharing its name :)?
Massive Attack - Teardrop
@@Lobos222 the outro one I was talking about, at 6:00 :D
@@tedyrusu9959 Yeah, if you listen carefully. You can hear that it uses the same beat. It isnt the actual song, because that is trademarked, but it is derived from it.
11:03
Goodwill -- amount you overpay for something.
Basically it's overpaid