The investment banking interview question we’re going to go over today is “What is the difference between intangible assets and goodwill?” The two are very similar. They’re both assets, but they are non-physical, meaning you can’t physically touch either of them. So how do you articulate the difference between them in an interview? Here’s what you can say.
“Intangible Assets are non-physical assets that can be identified and individually quantified. So for example, we might be able to single out one particular patent, and we can quantify how much that one patent is worth on the Balance Sheet.
By contrast, Goodwill are non-physical assets that cannot be identified and cannot be individually quantified. We know there’s something the company has that has value, but we don’t know exactly what it is. It could be reputation, good relationship with suppliers, good relationship with customers, or it could be something else. We know there’s value somewhere but we just can’t pinpoint where that value is coming from. Since we can’t identify the exact components within Goodwill, naturally, we can’t individually quantify the components that make up Goodwill either.
So whereas we can identify and individually quantify Intangible Assets, we can’t identify and individually quantify Goodwill.”
So that’s how you should answer this interview question: “What is the difference between intangible assets and goodwill”. The biggest mistake candidates make in this question is the inability to eloquently articulate the difference. They’d speak for a long time and we’d still have no idea what their point is. That’s the most common mistake I saw during my time on Goldman Sachs’s recruiting team. So make sure you can clearly explain the difference between the two.