Residual income is calculated as:

Question

Quizplus · Accepted Answer

Residual income is a measure of how much value an investment centre generates above its required rate of return. It is calculated as the investment centre's profit minus its assets multiplied by its required rate of return. Option B is the only choice that correctly represents this formula. Option A is incorrect because it only calculates the profit margin and not the required rate of return. Option C and D both calculate other financial metrics and do not represent residual income. Therefore, the correct choice is B.

Residual Income Is Calculated As