Residual income is the net operating income that an investment centre earns above the
minimum required return on the investment in operating assets.

Residual Income

The income that remains after subtracting all the costs of capital from the net operating income.

Net Operating Income

Earnings before interest and taxes (EBIT), a measure of a company's profitability from operations.

Minimum Required Return

The minimum return that investors expect to earn from their investment.