Goodwill in financial terms is defined as:

Goodwill is an intangible asset that arises when a company acquires another business for a price that exceeds the fair value of its identifiable net assets. This excess amount reflects the value of various intangible factors that contribute to the target company's profitability, such as brand reputation, customer relationships, skilled workforce, and synergies expected from the acquisition.

When a business is purchased, the acquiring company will assess the fair value of the assets and liabilities of the acquired company. Goodwill is computed as the difference between the purchase price and the sum of the fair value of identifiable assets minus liabilities. This definition aligns with the accounting standards that dictate how to account for business combinations and helps investors understand the premium paid for a company's intangible advantages that are not specifically identified or valued in other asset categories.

Understanding this concept is critical for evaluating the financial health and value of companies, particularly in terms of their acquisitions and mergers. It highlights how companies are often willing to pay more than just the book value of identifiable assets due to the advantages that come with the business itself.