Talk:Residual income valuation

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Guaranteed Residual income[edit]

Is a "basic income" & "guaranteed residual income" considered the same thing? So residual means some is leftover --do some work once & that generates a sort of permanent income that never stops. Pepper9798 (talk) 22:48, 5 January 2016 (UTC)[reply]

Origin of residual income[edit]

There is evidence that the origin of residual income goes back to the 1950s. Please read the following paper: http://kifri.fri.uniza.sk/ojs/index.php/JICMS/article/viewFile/1146/501 --TheRandomIP (talk) 23:53, 11 February 2016 (UTC)[reply]

Dr. Magni's comment on this article[edit]

Dr. Magni has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

(1) A reader unacquainted with residual income who read this page will find it difficult to understand residual income conceptually. It should be stated explicitly that residual income is the difference between two incomes related to two different courses of action: the investment in a firm (or project) and the counterfactual investment of the same capital in the capital market at the opportunity cost of capital.
(2) Residual income does not necessarily refer to "equity". The notion is general, and can be applied in either an equity perspective or an entity perspective. In the latter case, NOPAT is the income and the opportunity cost is given by the product of WACC and the book value of assets. EVA, for example, derives from an entity perspective, not an equity one (the capital considered is not the equity).
(3) Residual income is not a metric, but a theoretical notion which embraces many different metrics. EVA is only one of these, so it should be not compared with the "residual income". EVA is but a particular instantiation (particular case) of residual income.
(4) Magni (2009, EJOR) is an exhaustive illustration of the residual-income concept. It illustrates the origins and the story, explains in detail its conceptual content and the relation with the notion of opportunity cost, mentions its various uses, presents various instantiation of residual income, supplies a detailed reference list and also shows that the notion of residual income is not unique: the standard notion is but one possible notion among other ones.
Magni C.A. (2009), Splitting up value: A critical review of residual income theories. European Journal of Operational Research 198 (2009) 1–22.
I think this paper should be cited and that the first part of this Wiki page should be rewritten to let readers better conceptualize the notion of residual income. I can do it, if needed.

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

We believe Dr. Magni has expertise on the topic of this article, since he has published relevant scholarly research:

References : Ghiselli Ricci, Roberto & Magni, Carlo Alberto, 2014. "Axiomatization of residual income and generation of financial securities,". Quantitative Finance, 14(7), 1257‒1271.

ExpertIdeasBot (talk) 20:25, 24 September 2016 (UTC)[reply]

Magni, Carlo Alberto, 2009. "Splitting up value: A critical review of residual income theories". European Journal of Operational Research, 198(1) (October), 1−22.