Residual income is the:
A) difference between the net sales that the analyst expects the firm to generate and the required earnings of the firm.
B) difference between the net income that the analyst expects the firm to generate and the required earnings of the firm.
C) difference between the common stock that the analyst expects the firm to issue and the required earnings of the firm.
D) difference between the expenses that the analyst expects the firm to generate and the required earnings of the firm.

Question

Quizplus · Accepted Answer

Residual income is the difference between the net income that the analyst expects the firm to generate and the required earnings of the firm. This is a measure of how much value the firm has added beyond its expected earnings, and it can be used as a way to evaluate the effectiveness of a firm's investments.

Residual Income Is The