Which one of the following will increase the current residual income of a firm?
A)an increase in required earnings
B)a decrease in the current earnings per share
C)a decrease in future earnings per share
D)a decrease in the required return on the firm's equity
E)an increase in the firm's beginning book equity per share

Question

Quizplus · Accepted Answer

Decreasing the required return on the firm's equity will increase the current residual income of a firm. Residual income is calculated as the net income minus the required return on the firm's equity, so decreasing the required return will increase the residual income. None of the other choices will increase the current residual income.

Which One of the Following Will Increase the Current Residual