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7 Cards in this Set

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Residual Income
The net operating income that an investment center earns above the minimum required return on its operating assets.

(Garrison, Ray H.. Managerial Accounting, 12th Edition. Irwin/McGraw-Hill, 022007. 12.10)
Return on Investment (ROI)
Net operating income divided by average operating assets. It also equals margin multiplied by turnover.

(Garrison, Ray H.. Managerial Accounting, 12th Edition. Irwin/McGraw-Hill, 022007. 12.10)
ROI Formula
Net Operating Income / Average Operating Assets

NOI / AOA = ROI
Margin
Operating Income / Sales

OI / Sales = Margin
Turnover
Sales / Average Operating Assets

Sales / AOA = Turnover
ROI Formula using Margin and Turnover
Margin x Turnover = ROI

OI / Sales x Sales / AOA = ROI
Residual Income Formula
Current Income - Minimum Required Income

CI - MRI = RI