Question #41
Reading: Reading 23 Residual Income Valuation
PDF File: Reading 23 Residual Income Valuation.pdf
Page: 22
Status: Unattempted
Correct Answer: B
Question
A residual income model would be least appropriate as a tool to measure which of the following?
Answer Choices:
A. Goodwill impairment
B. Operating leverage
C. Economic income
Explanation
Operating leverage is not measured directly by residual income models, although
operating leverage may have an effect on the residual income measured. Residual income
models are intended as a measure of economic income, and are often used to measure
goodwill impairment.