What Is The Prime Reason That Jenny's Discretionary (2024)

FAQs

What Is The Prime Reason That Jenny's Discretionary? ›

What is the prime reason that Jenny's discretionary income is more volatile than her salary? Answer : Her mortgage payments and necessities are fixed.

Her cost of living is affected by high inflation in the neighborhood. Discretionary income is the remaining amount after deducting taxes, mandatory contributions, and other necessary costs including mortgage. Taxes and mortgage payments normally have fixed rates which will not change the discretionary income.

How is the scenario of Jenny's changing discretionary income with her changing salary analogous to the nature of equities? A) It shows how the value of equities can fluctuate with changes in a company's profitability.

Expert-Verified Answer

is equal to the change in salary because the fixed costs remain constant. Therefore, as Jenny's salary increases, her discretionary income increases by the same amount, assuming that the fixed costs do not change.

Understand that operating leverage refers to the proportion of fixed costs a company has in its cost structure compared to variable costs and in Jenny's situation, her fixed costs such as rent, utilities, or loan payments can be seen as a form of operating leverage.

The definition of discretionary spending is buying items or services you want but can survive without. Deciding not to purchase the item won't adversely impact your health, income security, or livelihood.

Discretionary income is the amount of an individual's income that is left for spending, investing, or saving after paying taxes and paying for personal necessities, such as food, shelter, and clothing. Discretionary income includes money spent on luxury items, vacations, and nonessential goods and services.

Discretionary income is the amount of income a household or individual has to invest, save, or spend after taxes and necessities, like mortgages or rent, utilities, student loans, or credit card debts are paid.

For the SAVE Plan, your discretionary income is the difference between your adjusted gross income (AGI) and 225% of the U.S. Department of Health and Human Services (HHS) Poverty Guideline amount for your family size and state.

Seller's discretionary earnings is a cash-flow based measure of business earnings in an owner-operated business. It comprises the profit before tax and interest of a business before the owner's benefits, non-cash expenses, extraordinary one-time investments, and other non-related business incomes and expenses.

What is the theory of discretionary income? ›

Discretionary income is equal to disposable income minus all payments for necessities, including a mortgage or rent payment, health insurance, food, and transportation. This portion of disposable income can be spent at will.

Fixed costs are expenses like rent and property taxes that a company has to pay, regardless of how many units it produces. Within the category of fixed costs, there are many variations. Discretionary costs are non-essential expenses that aren't controlled by the amount of products produced.

Discretionary income is used to determine how much you should save and how much you can spend. It's used as a metric by economists and government agencies to determine how the economy is doing.

Leverage is using debt or borrowed capital to undertake an investment or project. It is commonly used to boost an entity's equity base. The concept of leverage is used by both investors and companies: Investors use leverage to significantly increase the returns that can be provided on an investment.

Operating Leverage tells you how much of a company's expenses are fixed (i.e., they do not change with production volume) vs. variable (i.e., they do change with production volume); higher operating leverage means that as sales grow, more of these sales “trickle down” into a company's Operating Income.

What Is Operating Leverage? Operating leverage is a cost-accounting formula (a financial ratio) that measures the degree to which a firm or project can increase operating income by increasing revenue. A business that generates sales with a high gross margin and low variable costs has high operating leverage.

Answer. Financial leverage increased Jenny's potential return on investment by allowing her to purchase a house with borrowed funds, which could amplify profits if the property appreciates in value.

Discretionary income is the amount left from a person's earnings after paying taxes and paying for personal needs such as food and shelter.

In 2015, an accounting gimmick gave Ireland a 26% growth rate in GDP. What does this event reflect about the nature of GDP? Answer : If the measurement ofeconomic activity evolves, GDP can change.

The gross domestic product (GDP) may be the most important indicator out there, especially to equity investors who are focused on corporate profit growth. Since the GDP represents the sum of what our economy is producing, its growth rate is targeted to be in certain ranges.