Residual pay is income that one continues to receive after the completion of the income-producing work. Some common examples of residual pay include royalties, rental/real estate income, interest and dividend income, and income from the ongoing sale of consumer goods (e.g., music, digital art, or books), among others.
Residual pay is not exactly a type of income but a calculation determining how much discretionary money an individual or entity can spend after paying their bills and meeting their financial obligations. Residual income is a form of passive income because entities may earn it without any effort.
Residual pay, sometimes also called discretionary income, can refer to how much money in a reporting period remains after an entity covers all of its costs. Residual income is also a term used in personal finance to refer to income a person continues to receive after a fixed amount of initial work is completed. Overall, residual pay can mean many different things depending on the context, whether in the world of personal finance, corporate finance, or equity valuation
In corporate finance, for example, residual pay, also known as a company's net operating income, is any profit exceeding its required rate of return. Meaning it is any profit remaining after a company pays all its capital costs. In the entertainment and movie industry, residual pay means Residual supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
