Residual income:
A) is an alternative to ROI for manager performance evaluation..
B) is the amount of income earned in excess of a predetermined minimum level of return on assets.
C) is equal to ROI - (Average operating assets ´ Minimum required rate of return)
D) both A and B.

Question

Quizplus · Accepted Answer

Residual income is indeed an alternative to Return on Investment (ROI) for evaluating a manager's performance, as it considers the net operating income earned above the minimum required return on the company's assets. It also represents the amount of income earned in excess of a predetermined minimum level of return on assets, making both A and B correct statements about residual income.

Residual Income