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28 October, 07:09

Residual income can be defined as:

Multiple Choice:

O Income remaining after dividends are paid out.

O Operating earnings minus return on investment.

O Operating earnings plus a minimum acceptable return times average invested capital.

O Operating earnings minus a minimum acceptable return times average invested capital.

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Answers (1)
  1. 28 October, 08:14
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    Residual income

    = Operating earnings - (minimum acceptable return x average invested capital)

    The correct answer is D

    Explanation:

    Residual income is one of the measures of divisional performance. It si the excess of operating earnings over the product of minimum acceptable return and average invested capital.
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