on the graph below the line a b c illustrates residual income measured on the vertic 630863

Items 1 and 2 are based on the following information:

On the graph below, the line (A-B-C) illustrates residual income (measured on the vertical axis in dollars) at various interest rates. Point D is the cost of capital or the required rate of return. Point E is the residual income at the cost of capital.

What does point B represent?

  1. Return on sales.
  2. Return on investment.
  3. Asset turnover.
  4. Operating income.

What does point A represent?

  1. Return on sales.
  2. Return on investment.
  3. Asset turnover.
  4. Net income.