ADM 2341 Lecture Notes - Lecture 31: Financial Statement, Uptodate, Income Approach

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May be valued at their acquisition cost, book value, appraised value, or market value. The rst two values are easily found in the accounting records: margin (income) measure. This measure may be the controllable margin, income from operations, or net income. Although most companies use the roi in evaluating their investment performance, the. The problem with this roi analysis is that it ignores an important variable: the minimum rate of return on a company"s operating assets. The minimum rate of return is the rate at which the marine division can cover its costs and earn a pro t. Residual income = the income that remains after subtracting from the controllable margin the minimum rate of return on a company"s average operating assets. > eva is similar to residual income since it is a measure of the income created by the investment centre above the cost of invested assets.

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