Residual income is the difference between net operating income and the product of average operating assets and the minimum rate of return.

Residual Income

A measure of performance that calculates the income an investment generates above the minimum required return.

Net Operating Income

A measure of a company's profitability, calculated by subtracting operating expenses from operating income.

Average Operating Assets

The average value of the assets used in the normal operations of a business over a specific period, typically used in return on investment calculations.