Residual income is the difference between net operating income and the product of average operating assets and the minimum rate of return.

Minimum Rate Of Return

The least expected rate of return on an investment necessary for it to be considered a viable option.

Residual Income

The income that exceeds the minimum rate of return, often used as a measure of the performance of investment centers within organizations.

Net Operating Income

Profit generated from a company's normal business operations, excluding deductions of interest and taxes.