Crawford Corp.has an ROI of 15% and a residual income of $10,000.If operating income equals $30,000,what is the amount of average invested assets?
A)$200,000
B)$66,667
C)$450,000
D)$150,000

Question

Quizplus · Accepted Answer

Residual Income (RI) = Operating Income - (Average Invested Assets * Required Rate of Return). Given RI = $10,000 and Operating Income = $30,000, we can rearrange the formula to solve for Average Invested Assets: $10,000 = $30,000 - (Average Invested Assets * 15%). Solving for Average Invested Assets gives us $200,000.