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

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.