The excess of divisional income from operations over a minimum acceptable divisional income from operations is termed:
A)profit margin.
B)residual income.
C)rate of return on investment.
D)gross profit.

Question

Quizplus · Accepted Answer

The term used for the excess of divisional income from operations over a minimum acceptable divisional income from operations is residual income. This is a measure of the division’s profitability, independent of the cost of capital invested in the division. It helps in assessing the division’s performance, particularly for divisions with a high level of investment. Option A, C, and D are incorrect because profit margin refers to the ratio of profit to revenue, rate of return on investment refers to the ratio of income to investment, and gross profit refers to the difference between revenue and cost of goods sold.

The Excess of Divisional Income from Operations Over a Minimum