What is the usual effect of efficient management on goodwill?

Correct answer: Goodwill increases

Efficient management is a favourable internal factor affecting the earning capacity and reputation of a business. Good managers generally improve planning, control costs, use resources effectively, maintain product or service quality and build customer confidence. These results can produce higher or more stable future profits, which increases the value of the firm’s goodwill. The effect is described as usual rather than automatic, because goodwill also depends on market conditions and other factors. Efficient management does not convert goodwill into a loan, make it useless or necessarily eliminate it. Therefore, the statement that goodwill increases is the most appropriate answer, making option A correct.