What is the goal of residual income?

Question

Quizplus · Accepted Answer

The goal of residual income is to maximize the total amount of residual income, which is the income that remains after deducting a minimum rate of return on the required investment. This is a useful measure of profitability as it takes into account the cost of capital and provides a more accurate picture of the profitability of a business or investment. Option A and D are incorrect as they only focus on maximizing controllable costs or margin, which may not necessarily lead to the highest residual income. Option B is also incorrect as maximizing profits does not necessarily guarantee that the minimum rate of return on the required investment has been met.

What Is the Goal of Residual Income