if goodwill makes up a large percentage of a company's total assets, this most likely indi- cates that:
A) the company has low free cash flow before dividends.
B) there is a low likelihood that the market price of the company's common stock is below book value.
C) a large percentage of the company's assets are not of high quality.

Question

Quizplus · Accepted Answer

Goodwill represents the premium paid by a company for an acquired asset or business, over and above its book value. Therefore, a large percentage of goodwill on a company's balance sheet indicates that a significant portion of its assets are not of high quality, as they have been acquired at a premium. This can be indicative of poor investment decisions, excessive acquisition activity, or even potential impairment of the goodwill itself, all of which can negatively impact the company's financial health and stability.

If Goodwill Makes Up a Large Percentage of a Company's