Which of the Following Is True Regarding the Term Residual

question 12

Multiple Choice

Which of the following is true regarding the term residual income?

• A)Residual income is the income over and above the amount needed to cover current expenses.
• B)Residual income is the income in excess of a charge for the capital that is employed to generate that income.
• C)Residual income is equal to economic income.
• D)Residual income is called abnormal earnings when applied to the enterprise's operating income and invested capital.

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Definitions:

Control

The power to direct the management and policies of a company through ownership of its shares, rights, or contractual arrangements.

Noncontrolling Interest

Refers to the ownership stake in a corporation that is less than the majority control, often represented by shareholders who do not have a significant influence over the company's operations.

Goodwill

Goodwill represents the intangible value of a business that exceeds its physical assets' value, often arising after the acquisition of one company by another.