Dynamic Corporation Provides the Following Financial Information Calculate the Residual Income of Dynamic Corporation

question 122

Multiple Choice

Dynamic Corporation provides the following financial information: $$\begin{array} { | l | r | } \hline \text { Minimum acceptable operating income } & \$ 520,000 \\\hline \text { Average total assets } & \$ 2,000,000 \\\hline \text { Operating income } & \$ 705,000 \\\hline \text { Return on investment } & 35 \% \\\hline \text { Net sales } & \$ 825,000 \\\hline\end{array}$$ Calculate the residual income of Dynamic Corporation.

• A)$1,480,000
• B)$305,000
• C)$185,000
• D)$6,521,250

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Definitions:

Infant Industry Theory

A theory which states that certain emerging industries need to be protected and nurtured for a period of time or they will be unable to compete against established foreign firms.

Neo-Mercantilism

An economic strategy emphasizing national economic policies that restrict imports and promote domestic industries through tariffs, subsidies, and other protectionist measures.

Foreign Competition

The competition that domestic companies face from abroad, often referring to the goods and services offered by companies located in other countries.

Infant Industry Theory

An economic rationale for trade protectionism arguing that emerging domestic industries need protection from international competition until they become mature and competitive.