Residual income is defined as ________.
A) sales less operating expenses
B) operating income divided by revenue
C) net operating profit after tax less a capital charge
D) net operating profit after tax

Question

Quizplus · Accepted Answer

Residual income is calculated as net operating profit after tax (NOPAT) less a capital charge, which reflects the cost of capital used to produce the income. It is a measure of the income that remains after deducting the cost of capital from the operating profit. A, B and D are incorrect as they do not reflect the cost of capital used to generate the income.

Residual Income Is Defined as ________