Residual income is calculated as
A) operating income - (ROI *average operating assets).
B) operating income/(ROI *average operating assets).
C) operating income/(minimum rate of return * average operating assets).
D) operating income -(minimum rate of return * average operating assets).
E) (minimum rate of return * average operating assets)/operating income.

Question

Quizplus · Accepted Answer

Residual income is calculated as the operating income minus the product of the minimum rate of return and the average operating assets. This formula is used to assess the excess income generated over the minimum expected return.

Residual Income Is Calculated as