Chapter – 16

Financial Management and Planning

In this post, we have given the Important Questions of Class 11 Home Science Chapter 16 (Financial Management and Planning) in English. These Important Questions are useful for the students who are going to appear in class 11 board exams.

Board	CBSE Board, UP Board, JAC Board, Bihar Board, HBSE Board, UBSE Board, PSEB Board, RBSE Board
Textbook	NCERT
Class	Class 11
Subject	Home Science
Chapter no.	Chapter 16
Chapter Name	(Financial Management and Planning)
Category	Class 11 Home Science Important Questions in English
Medium	English

Chapter 16 Financial Management and Planning

Short Answer Questions (1 Mark)

Q1. What do you understand by Financial Management?

Ans. Financial Management – Simply means management of finances. All types of income available to a family which includes salary, wages and rent. Planning, controlling and evaluation of all times of incomes is called financial management.

Q2. What is indirect real income?

Ans. Indirect real income is called the use of facilities or commodities which are received by a family after spending money.

Q3. Define Psychic Income.

Ans. Psychic Income – satisfaction derived from real income. It results from the ownership and utilization of goods and services.

Q4. Write two benefits of household accounts.

Ans. Household accounts

• Unwanted expenditure can be curbed.
• Wastage of money can be reduced.

Q5. What do you understand by Fringe Benefits.

Ans. Sometimes the person is provided with facilities or services instead of money as income at work. These features are called fringe benefits.

Q6. Define credit.

Ans. Credit – this comes from Latin word ‘’CREDO’’ meaning ‘’I believe’’. It means getting money, e-goods or services in the present and paying for them in the future.

Q7. What is the income?

Ans. The money, services and facilities coming from the money and other means in the family is called income.

Q8. Explain a way to increase psychic income.

Ans. Psychic income, satisfaction derived from real income. It results from the ownership and utilization of goods and services.

Q9. What are the two main functions of money?

Ans. Two main functions of money:

• It acts as a medium of exchange
• Measurement of value of products

Q10. Name any two Cs of credit.

Ans.

• Character
• Capacity
• Capital
• Collateral

Short Answer Questions (2 Marks)

Q1. Name four benefits of planning a family budget.

Ans. Four benefits of planning family budgets:

• Planning can make the family review the use of their income.
• The amount allocated for different categories can be taken care of in terms of total income.
• From the budget, families can use their income to achieve the goals they consider to be very important.
• Spending without planning again and again causes wastage of money.
• Family members are less likely to be distracted.

Q2. Explain the difference between fixed expenditure and semi-fixed expenditure.

Ans.

Fixed Expenditure:- This expenditure is certain; it cannot be reduced in any way. For example, the rent of the house, the child’s school fee, the salary of the Servants, etc.

Semi-Fixed Expenditure:- Expenditure may be increased or reduced on certain issues such as expenditure on clothing, food etc.

Q3. Explain the difference between money income and direct real income.

Ans.

Money Income:- purchasing power in Rupees and Paisa that goes into family treasury in a given period of time. When a family member receives cash after working for a certain time or as a result of his efforts is called money income. Money income is always received in the form of cash, pension etc.

Direct Real Income:- Direct real income is services and facilities that members of a family receive as a result of their efforts or use of community services without  pending money. Direct Income consists of those goods and services available to the family without use of money examplecooking, laundering, stitching, kitchen garden etc.

Q3. List Budget Formulation steps.

Ans. Budget Formulation Steps:

• Preparation of list of essential commodities and services.
• To estimate the cost of desired issues by pre-assessment.
• Estimating total potential income.
• To balance between all income and expenditure.
• To rationalize the schemes by examining them to succeed.

Q4. Make a list of four savings and investment options available to an Indian customer?

Ans. Four savings and investment options available to the Indian customer:

• Post Office
• Bank
• Unit Trust of India
• National Savings Scheme
• National Saving Certificate
• Shares and Bonds
• Mutual Funds
• Provident Fund
• Public Provident Fund
• Life Insurance and Medical Insurance
• Pension Scheme
• Gold, Home and Land (Any Four)

Long Answer Questions (4 Marks)

Q1. To prepare a budget is important for a family. Explain and write its advantages also?

Ans. Budget is the first step in managerial process.

• Its success depends upon
• It’s being realistic and flexible
• Suitability to the group for which it is prepared
• Quality of control and evaluation steps which follows.

Family budget give detail of income and expenditure of a family for a month or a year. It mentions all the sources of income during that period and also all the items of expenditure under different headings like food, clothing, housing, entertainment, travel, education, health, medicines and saving.

Advantages –

• Planning helps the family to take an overview of use of their income. Amounts allocated to various categories can be studied w.r.t. family income.
• Helps families to use their income to attain those goals which they consider most important.
• Family members are less likely to be swayed as they can make rational decisions.

Q2. Explain the principles underlying sound Investments?

Ans. Family spend a lifetime accumulating savings. The savings should be invested wisely to give family good returns and money is available to them when they need it. 4 Principles are-

• Safety of principal amount – Principal amount should be safe, if it is to earn interest. This principle is most important example – National Saving Certificate, Public Provident Fund, Kisan Vikas Patra, Fixed Deposits in banks.
• Reasonable rate of return – the higher the rate of return on investment, the greater the risk. Before investing money, one should compare the rate of interest and risk associated with various schemes and options.
• Liquidity – ability to convert securities into cash without sacrificing value. The more liquid an investment is higher is its price.
• Easy accessibility and convenience – while choosing an investment option for family funds, one must consider knowledge required for its success.

Q3. Raju needs money for his business. Tell him about the credit facility and how the decision to give credit is controlled, Explain?

Ans. Raju can use credit to meet the needs of his business. He can get money to buy raw material for his business or land on rent. Commercial bank and other financial institutes also give credit when they believe that the borrower will repay the money on time. The decision for credit is controlled by four C’s –

• Character – means willingness and determination to repay the loan as agreed.
• Capacity – capacity of a family to repay a loan is determined by the difference between what the family receives and what it spends.
• Capital – means net worth. It is determined by the difference between what it owns and what it shows.
• Collateral – specific units of capital which are pledged as security for a given loan. If borrower fails to pay the loan, the lender can reimburse himself from the sale of pledged collateral.

Before using credit, family should consider not only satisfaction given by goods or services but also future adjustment in repayment of the loan.

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