If a company division has a negative RI (residual income,) that means that the division did NOT use its assets as effectively as management expected.

Question

Quizplus · Accepted Answer

A negative residual income means that the division did not generate enough operating income to cover the cost of the assets it used, indicating that the division did not use its assets as effectively as management expected.

If a Company Division Has a Negative RI (Residual Income,)