Residual Income

Knowledge Center

What is Residual Income? Meaning.

Residual Income is the generic financial term for after-tax profit less an imputed interest charge for the opportunity cost of capital employed by the business. It is important to take the cost of capital into account, because otherwise indications of corporate performance are unreliable. These indications are used for many purposes including setting organizational goals, measuring the performance of a corporation, determining management bonuses, etc.

Economic Value Added, Cash Value Added and CFROI are all examples of residual income measures.

EBIT, EBITDA and Earnings per Share are examples of measures that do not include the opportunity cost of capital employed and are therefore unreliable when it comes to judging organizational performance.

Forum about Residual Income   The most recent topics about: Residual Income. 🔥 NEW Residual Income Cases and Examples Hi, do you know of a remarkable case or an interesting example of the use of residual income?Please enter a reaction to (...) 2

Compare also: WACC

Return to Management Hub: Decision-making & Valuation  |  Finance & Investing

More on Management  |  Return to Management Dictionary  | 

This ends our Residual Income summary and forum.