Which of the Following Is the Correct Formula for Calculating

question 138

Multiple Choice

Which of the following is the correct formula for calculating residual income?

• A) Weighted average cost of capital - Net operating profit after tax
• B) Operating income - Minimum acceptable operating income
• C) Historical cost of assets - Accumulated depreciation
• D) Operating income / Average assets

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Definitions:

Discontinued Operation Loss

A loss recognized when a segment of a business is closed or disposed of, and its operations will not continue.

Operating Expenses

These are the expenses related to the day-to-day functioning of a business, including costs such as rent, utilities, wages, and maintenance.

Comparative Balance Sheet

Financial statements that provide a snapshot of a company's financial condition at different time points, allowing for comparison over time.

Total Assets

The complete sum of everything a company owns, both current and long-term, that can be used to produce value.