regarding residual income concept...question measures, capital, required, economic, regarding

himanshumh

as we all know, it measures the economic profit of the firm, taking in all opprotunity costs of capital. If a firm's net income, after subtracting the required rate of return on equity, is negative.....what does it mean really??

I am just trying to relate that to the stock's price..., or do they not relate at all? what will the price be if the return is not enough to cover required return???
I was thinking in line of trading below instrinsic value..but that doesn't make sense thanks.

kkn006

If the RI couldn't cover the required return on equity, and also assuming this holds in future periods, I would short the stock.

NO EXCUSES