Asked by Emily Keith on Jul 20, 2024
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Residual income is the difference between net operating income and the product of average operating assets and the minimum rate of return.
Minimum Rate Of Return
The least expected rate of return on an investment necessary for it to be considered a viable option.
Residual Income
The income that exceeds the minimum rate of return, often used as a measure of the performance of investment centers within organizations.
Net Operating Income
Profit generated from a company's normal business operations, excluding deductions of interest and taxes.
- Comprehend the concept and calculation of residual income.
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Learning Objectives
- Comprehend the concept and calculation of residual income.
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