Which of the following statements MOST accurately explains a positive residual income?
A) A division has produced more operating income than the target set by upper management.
B) A division has generated positive operating income.
C) A division has been liquidated, and there is some residual amount of income earned after the liquidation.
D) A division has recorded a profit on sales of plant equipment which was sold for higher than its residual value.

Question

Quizplus · Accepted Answer

Positive residual income occurs when a division or investment generates more income than the minimum target income set by the company's management. It's a measure of performance that exceeds the expected return on investment, not just generating positive operating income, liquidation proceeds, or profits from asset sales.

Which of the Following Statements MOST Accurately Explains a Positive