Residual income is:
A) adjusted net income the firm reports.
B) the difference between the net income the analyst expects the firm to generate and the required earnings of the firm.
C) the difference between the net income the analyst expects the firm to generate and the reported earnings of the firm.
D) the book value of common equity capital at the beginning of the period multiplied by the required rate of return on common equity capital.

Question

Quizplus · Accepted Answer

Residual income is the net income generated by a firm minus the required earnings, which is the product of the book value of equity and the required rate of return.

Residual Income Is