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Chapter Analysis
Intermediate16 pages • EnglishQuick Summary
The chapter on Financial Management and Planning provides insights into managing family finances effectively. It covers various types of family incomes, the importance of financial planning, and detailed steps in creating a family budget. The chapter further elaborates on the significance of savings and investments, guiding students on sound investment principles to ensure financial security and growth. The use of credit and understanding its implications are also discussed.
Key Topics
- •Financial Management
- •Types of Family Income
- •Budgeting Process
- •Savings and Investments
- •Principles of Sound Investment
- •Use and Management of Credit
Learning Objectives
- ✓Understand the meaning and concept of financial management.
- ✓Know the different types of income.
- ✓Explain the steps in making family budgets.
- ✓Describe the meaning of savings and investments.
- ✓Discuss the principles of sound investments.
Questions in Chapter
Indicate if the following statements are ‘True’ or ‘False’.
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(i) Budget is the first step in money management. (True/False) ________
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(ii) Money serves as a medium of exchange of commodities. (True/False) _________
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(iii) Profits from business and gifts are a form of income. (True/False) _________
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(iv) One should first estimate the cost and then list the commodities and services needed while making the budget. (True/False) _________
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(v) Savings in physical assets are productive in economic terms. (True/False) _________
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(vi) The trend in business cycle is an important consideration under the principle of safety. (True/False) _________
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(vii) The time period may be ignored while considering and deciding on an investment. (True/False) _________
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(viii) The 4 C’s of credit are character, capacity, capital and collateral (True/False) _________
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(ix) Nature of enterprise is not an important safety consideration. (True/False) _________
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What do you understand by ‘management of finances’?
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Discuss the different types of income.
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Discuss the steps in making a budget.
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What are the controls that can be exercised in money management?
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Discuss the principles underlying sound investments.
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Additional Practice Questions
Explain the importance of financial planning for a family.
mediumAnswer: Financial planning is crucial as it ensures that the family's income is used effectively to meet day-to-day needs and long-term goals, minimizes wastage of money, and helps in establishing a secure financial future.
How can a family increase its potential to save money?
easyAnswer: A family can increase its potential to save by budgeting effectively, minimizing unnecessary expenses, setting clear financial goals, and regularly monitoring their spending habits.
What is the difference between real income and psychic income?
mediumAnswer: Real income refers to the actual flow of commodities and services available for satisfying needs, while psychic income is the satisfaction or pleasure derived from owning and using these goods and services.
List and describe the 4 C’s of credit.
hardAnswer: The 4 C's of credit include Character (borrower's reliability), Capacity (borrower's ability to repay), Capital (borrower's assets), and Collateral (security against the loan).
Discuss the impact of savings on economic growth.
mediumAnswer: Savings lead to capital formation which is essential for economic growth. When families save money and invest it productively, they contribute to economic development by enabling business investments and enhancing capital stock in the economy.