Residual income can be defined as:
A)Income remaining after dividends are paid out.
B)Operating earnings minus return on investment.
C)Operating earnings plus a minimum acceptable return times average invested capital.
D)Operating earnings minus a minimum acceptable return times average invested capital.

Question

Quizplus · Accepted Answer

Residual income is the income that remains after deducting a minimum acceptable return from the actual earnings. It is the excess of operating earnings over the cost of capital. Therefore, option D is the correct definition of residual income.

Residual Income Can Be Defined As