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 New Topic Forum about Residual Income. 🔥 NEW RI Cases and Examples Hi, do you know of a remarkable case or an interesting example of the use of RI? Please enter a reaction (...) 2   Start a new forum topic about Residual Income. More info. Share your opinion, knowledge and experience or ask a question (sign up for free first)

Information Sources Sign up Various sources of information regarding Residual Income. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops.

Research Links Sign up Automatically jump to further useful sources regarding Residual Income. News Videos Presentations Books More

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.