Residual Income

question 96

Multiple Choice

Residual income:

• A) is an alternative to ROI for manager performance evaluation..
• B) is the amount of income earned in excess of a predetermined minimum level of return on assets.
• C) is equal to ROI - (Average operating assets ´ Minimum required rate of return)
• D) both A and B.

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Definitions:

Marginal Benefit

The heightened satisfaction or usefulness derived from the consumption of an extra unit of a good or service.

Marginal Cost

The cost added by producing one extra item of a product. It's a critical concept in economics for determining the optimum production level.

Supply-Side Market Failures

Overallocations of resources that occur when private supply curves understate the full cost of producing a good or service.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity of that good that consumers are willing and able to purchase at various prices.