Which of the following is the formula to calculate residual income?
A)Operating income - average assets
B)Operating income plus interest and depreciation expense
C)Operating income - (average assets × required minimum rate of return)
D)Operating income - (average assets + required minimum rate of return)

Question

Quizplus · Accepted Answer

Residual income is calculated by subtracting the product of the average assets and the required minimum rate of return from the operating income. This formula is represented as Operating income - (average assets × required minimum rate of return). Option C is the only choice that matches this formula.

Which of the Following Is the Formula to Calculate Residual