All Other Things Equal, Which of the Following Would Increase

question 327

Multiple Choice

All other things equal, which of the following would increase a division's residual income?

• A) Increase in expenses.
• B) Decrease in average operating assets.
• C) Increase in minimum required return.
• D) Decrease in net operating income.

---

Definitions:

Gain on Sale

The profit realized from the sale of assets other than inventory, calculated as the sale proceeds minus the carrying value of the asset sold.

Debt Investments

Financial assets purchased with the expectation that the investment will generate interest income and be repaid in the future.

Interest Accrual

The recognition of interest earned or payable that has accumulated but not yet been recorded or paid.

Debt Investments

Investments made by purchasing bonds or other debt instruments, with the expectation of earning interest income and the return of principal.