Sun Inc.has average total assets of $500,000.The annual operating income of the company is $100,000.The target rate of return for the company is 18%.Calculate the residual income (RI).

Question

Quizplus · Accepted Answer

Residual income is calculated as operating income minus the product of the target rate of return and average total assets. Here, RI = $100,000 - (18% of $500,000) = $100,000 - $90,000 = $10,000.

Sun IncHas Average Total Assets of $500,000