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21 September, 17:48

What is discretionary income? What is equity? Provide brief examples of each. Why are both important to an entrepreneur?

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  1. 21 September, 21:25
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    Discretionary income is the income that is left over after necessary spending (i. e. taxes, bills, other necessities for running a business). Equity in accounting is how much your particular business/location is worth versus your debts.

    Both discretionary income and equity is very important in entrepreneurship because in order to be successful, you need a certain discretionary income left over to make a profit. If you're spending all of your money on your necessities to make your business run, you will "break even", meaning you will not return a profit. This ties into equity. If you're continuing to "break even", your equity will lower. You want your ratio to value of your business and a lower debt to make things balance out in your favor.
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