When evaluating residual income, the calculation tells management what percentage return was generated by the particular division being evaluated.

Name: When evaluating residual income, the calculation tells management what percentage return was generated by the particular division being evaluated.
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Residual income is not a percentage return, but rather a dollar amount that represents the income that remains after deducting the division's cost of capital from its operating income.

When Evaluating Residual Income, the Calculation Tells Management What Percentage