Explanation of Goodwill to Assets Ratio:

The Goodwill to Assets Ratio measures how much Goodwill the company is recording for its current level of assets.  Most companies have some form of Goodwill, but the main use of this ratio is to monitor excessive use of Goodwill.

Importance of Goodwill to Assets Ratio:

An increasing Goodwill to Assets Ratio may indicate the company is recording a higher proportion of Goodwill, as long as its Total Assets are about the same level over the same time span.  Mergers, or acquisition of assets from another company can explain sharp increases, but one has to watch this ratio and compare its results with other companies in the same industry to gauge how well the company is managing its Goodwill.

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