The difference between operating income and the minimum dollar return required on a company's operating assets is:
A) the return on investment (ROI).
B) the residual income.
C) economic value added (EVA).
D) the gross margin.
E) the operating turnover.

Question

Quizplus · Accepted Answer

Operating income is the income a company generates from its usual operations, whereas the minimum dollar return required on a company's operating assets is the cost of capital. Residual income is the difference between the operating income and the cost of capital, indicating how much value a company adds to its shareholders' wealth. Therefore, Option B is the best choice.

The Difference Between Operating Income and the Minimum Dollar Return