Which of the following is true regarding the term residual income?
a. Residual income is the income over and above the amount needed to cover current expenses.
b. Residual income is the income in excess of a charge for the capital that is employed to generate that income.
c. Residual income is equal to economic income.
d. Residual income is called abnormal earnings when applied to the enterprise’s operating income and invested capital.
ANSWER: B
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