Determine the February 20xx Residual Income for an Investment Center

question 27

Multiple Choice

Determine the February 20xx residual income for an investment center with the following information: $\begin{array}{lr}\text { Operating income for the month ended February 28, 20xx } & \$ 2,900,000 \\\text { Desired ROI } & 52 \% \\\text { Actual ROI } & 38 \% \\\text { Assets invested } & \$ 18,200,000\end{array}$

• A) ($4,016,000)
• B) ($5,836,000)
• C) ($6,564,000)
• D) ($8,384,000)

---

Definitions:

Times Interest Earned Ratio

A financial metric that measures a company’s ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.

Creditors

Individuals or institutions that lend money or extend credit to others, with the expectation of being paid back with interest.

Price-Earnings Ratio

The ratio for valuing a company that measures its current share price relative to its per-share earnings, widely used by investors to assess the market's valuation of a stock relative to its earnings performance.

Financial Statements

Reports that summarize the financial performance, position, and cash flows of a business for a specified period.