The basic idea behind residual income is to have a division maximize its:
A) earnings per share.
B) income in excess of a corporate imputed interest charge.
C) cost of capital.
D) cash flows.
E) invested capital.

Question

Quizplus · Accepted Answer

Residual income is a measure of profitability that calculates the net income a company generates above its cost of capital. It is specifically designed to assess the income generated in excess of a minimum required return (a corporate imputed interest charge) on its invested capital.

The Basic Idea Behind Residual Income Is to Have a Division