Residual income is a better measure for performance evaluation of an investment center manager than the return on investment because desirable investment decisions will not be rejected by divisions that already have a high ROI.
Residual income is the income that you continue to earn after you have finished your income-generating work. Examples of residual income include royalties, rental/property income, interest, and dividend income, and income from ongoing sales of consumer goods (music, digital art, books, etc.).
Basically, the amount left after making the required payments. Residual income is an important metric as it is one of the numbers banks and lenders check before approving a loan.
Once you have your budget fully tabulated, the formula for calculating your remaining income is simple. Take the total amount you earn as your income and subtract your monthly expenses. The difference is the Residual income.
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