Question

What does the "residual income" measure? How is it expressed as a formula?

Answer 1

The residual income measures the amount of money left over after all expenses and bills have been paid. The formula for calculating residual income is: Residual Income = Net Income - (Minimum Required Return x Equity).

Step-by-step explanation:

The residual income measures the amount of money left over after all expenses and bills have been paid. It is the income that can be used for investing, saving, or discretionary spending. The formula for calculating residual income is: Residual Income = Net Income - (Minimum Required Return x Equity).