Residual Income Is Equal To

question 44

Multiple Choice

Residual income is equal to:

• A) Net income earned above a specified minimum return on assets
• B) Net income divided by average total assets
• C) Average total assets divided by net sales
• D) Net sales divided by net income

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Definitions:

Net Income

The overall earnings of a firm once expenses and taxes are subtracted from its total revenue.

Cash Flow Hedge

A financial strategy used to manage the risk of fluctuations in cash flows caused by changes in foreign exchange rates, interest rates, or commodity prices.

Spot Exchange Rates

Refers to the current exchange rate at which a currency can be bought or sold for immediate delivery.

Foreign Currency

Currency used in a country other than one's own, necessitating exchange for local use.