Residual Income (RI): Residual Income indicates the amount of surplus income earned over the required rate of return . The formula is as follows: Residual Income = Operating Income – ( Average assets ×Required rate or Return ) To indicate: the meaning of residual income.

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Chapter 12, Problem 12.6Q

To determine

Concept introduction:

Residual Income (RI): Residual Income indicates the amount of surplus income earned over the required rate of return. The formula is as follows:

Residual Income = Operating Income – (Average assets ×Required rate or Return)

To indicate: the meaning of residual income.

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