The following information is available for the Peppercorn Company:

-Residual income is defined as
A) net income less "imputed" interest.
B) sales less expenses.
C) income divided by revenue.
D) being the same as ROI.

Question

The following information is available for the Peppercorn Company:
 
-Residual income is defined as
A) net income less "imputed" interest. 
B) sales less expenses. 
C) income divided by revenue. 
D) being the same as ROI.

Quizplus · Accepted Answer

Residual income is the profit earned by a firm after accounting for the cost of capital. It is calculated as net income minus a charge for the cost of capital. This charge is often referred to as "imputed" interest, and it represents the opportunity cost of using capital to finance the operations of the business. Therefore, A is the correct answer.

The Following Information Is Available for the Peppercorn Company