DEFINITION of 'Goodwill To Assets Ratio'
A ratio that measures how much goodwill a company is recording compared to the total level of its assets. The goodwill to assets ratio is useful for monitoring a company's use of goodwill. Although many companies record some form of goodwill, excessive use can lead to problems.
Goodwill to assets is calculated as:
BREAKING DOWN 'Goodwill To Assets Ratio'
If this ratio increases, it can mean that the company is recording a proportionately higher amount of goodwill, assuming total assets are remaining constant. By comparing a company's goodwill to assets ratio to those of other companies within the same industry, investors can get a feel for how a company is managing its goodwill. It is generally good to see a company increasing its assets regularly; however, if these increases are coming from intangible assets, such as goodwill, the increases may not be as good.