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Bouwe Visser
on Nov 12, 2024

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If divisional income from operations is $100,000, invested assets are $850,000, and the minimum return on invested assets is 8%, the residual income is $68,000.

Minimum Return

The lowest acceptable rate of return on an investment that a manager or investor is willing to accept.

Residual Income

Residual income is the amount of net income generated in excess of the minimum rate of return. It's often used to assess the performance of business units.

Invested Assets

Resources or funds that have been allocated for investment purposes in various types of assets, such as stocks, bonds, or real estate, aiming for potential returns.

  • Comprehend the idea of residual income as a metric for evaluating performance and the process for its determination.
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Rachel BalmerNov 13, 2024
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