Residual income is calculated as:
A) Net profit - (required rate of return × average operating assets)
B) Operating profit - (required rate of return × average equity)
C) Operating profit - (required rate of return × average operating assets)
D) Net profit - (required rate of return × average equity)

Question

Quizplus · Accepted Answer

Residual income is calculated as operating profit minus the product of the required rate of return and average operating assets. This measures the excess income generated above the required return on operating assets.

Residual Income Is Calculated As