[amp_mcq option1=”Share Premium” option2=”Goodwill” option3=”Capital Employed” option4=”Working Capital” correct=”option2″]
The correct answer is: B. Goodwill
Goodwill is an intangible asset that arises when a company acquires another company for more than the fair value of its net assets. It is the excess of the purchase price over the fair value of the net assets acquired. Goodwill is recorded on the balance sheet as an intangible asset and is amortized over a period of not more than 20 years.
Share premium is the excess of the issue price of a share over its par value. It is recorded in the equity section of the balance sheet.
Capital employed is the total of a company’s equity and liabilities. It is used to calculate a company’s return on capital employed (ROCE).
Working capital is the difference between a company’s current assets and its current liabilities. It is used to measure a company’s liquidity.