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When ATO remains constant.

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Q: When is the forecasted growth rate in residual operating income the same as the forecasted growth rate in sales?
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How do you calculate residual income?

Residual Income (RI) can be calculated with the following equation. RI = Operating Income - (Operating Assets x Minimum Required Rate of Return) Equals a $ amount. RI is often used to compare Investment Centers with the Return of Investments (ROI) equation. ROI = Operating Income / Operating Assets) Equals a %.

What does projected income mean?

Projected income is the amount of money that a company's accounting staff estimates the company will earn in the next fiscal period (or further in the future). It is generally forecasted using historical data and trends in income growth/decline, and predicted growth patterns from current and historical information.

Who does Residual income of a firm belongs to?

The residual income of the firm belongs to

The residual income of the firm belongs to?

residual income belongs to the common stockholders.

How is residual operating income calculated?

Residual Operating Income (ReOI) is a method of valuing a firm's operations. The formula below can be used on historical data to identify and analyse historical trends, but lenders (as well as any other interested parties) can also use forecasted figures to predict the future value of the firm, to (e.g.) help in their lending decisions. ReOI for a trading entity = Total Sales x [Core Sales Profit Margin - (Required Return / ATO)] + Other OI +UI Where: Core Sales Profit Margin = Net Operating Profit after tax / Total Sales Required Return is the rate demanded by the investor, given the level of risk in the business ATO = Asset Turnover = Total Sales / NOA NOA = Net Operating Assets = Accts Receivable + Inventory + PP&E Other OI = Includes income derived by a parent entity from its subsidiaries UI = Unusual Income - e.g. if the restructuring of a firm impacts on its operating income (not common)

Would you explain residual income guidelines for FHA loans?

FHA doesn't have residual income guidelines...this applies to VA loans

What is the distinction between operating and non operation income?

Income which is generated by normal business basic operating activities is called net operating income while other income then operating income is called non operating income like interest income or dividend income etc.

How do you calculate net operating income?

Total operating income less total operating expense = net operating income (or loss if the expenses were higher)

Cost to income ratio?

operating expenses/operating income

How do you calculate the degree of operating leverage?

The degree of operating leverage (DOL) is calculated by dividing the percentage change in operating income by the percentage change in sales revenue. It helps measure the sensitivity of operating income to changes in sales revenue. The formula is DOL = % change in operating income / % change in sales revenue.

What is the cheapest investment or business that will yield guaranteed residual income and still has growth potential?

This is a great question but no one gives away a secret like that. "the game is to be sold not told"

What is the difference between operating income and non-operating income?

Operating income is that income which is earned through primary business activity while non operating income is that part of income which is not generated through primary operations of business like interest income, dividend income etc.