Asked by Kamia Bryan on May 18, 2024
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Magnolia Company's Division A has income from operations of $80,000 and assets of $400,000. The minimum acceptable return on assets is 12%. What is the residual income for the division?
Residual Income
The amount of income that an entity has after all personal debts and expenses, including the cost of capital, have been paid.
Acceptable Return
The minimum profit or benefit expected by an investor for the risk taken on an investment.
Income from Operations
Financial performance metric that shows earnings from normal business activities, excluding effects of interest and taxes.
- Understand the concept and calculate the residual income for a division.
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Learning Objectives
- Understand the concept and calculate the residual income for a division.
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