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Chapter 24: Q22RQ (page 1355)

What does RI measure?

Short Answer

Expert verified

RI or Residual income measures excess of operating income over minimum acceptable income

Step by step solution

01

Meaning of RI

The residual income strategy measures the net income that investment makes at a cutoff determined by the investment's minimum rate of return.

02

Explanation on RI

Companies can more successfully communicate assets between resources by computing residual income. A positive RI indicates that the business has outperformed its lowest rate.

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