<u>The net income is lower than the gross income because of withholdings.
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Further Explanation:
Gross Profit: It defined as the profit that a company earns after reducing the costs that are related to manufacturing and selling the products, or providing the services.
Net Profit: It calculated by deducting all interest, operating expenses, taxes, and dividends from a company's total revenue.
Justification for the correct and incorrect answer:
Fixed spending: This option is incorrect.
It refers to the fixed expenses that are incurred in the production and administration of the company.
Budgets: This option is incorrect.
A budget is a financial plan that estimates revenue and expenses for a specified period.
Withholdings: This option is correct.
Withholding refers to the part of an employee's wages that do not form a part of their paycheck but is directly remitted to the local tax authorities, federal or state. It reduces the net profit as it is reduced from it.
Discretionary spending: This option is incorrect.
Discretionary spending is defined as the costs that are not directly associated with operational procedures of the business.
Learn more:
1. Learn more about the resources and expenses
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2. Learn more about the goal of the budget
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3. Learn more about the tax on income
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Answer details:
Grade: High School
Subject: Accounting
Chapter: Income statement
Keywords: Net income, gross income, fixed spending, budgets, withholdings, discretionary spending, income statement, loss, profit,