Family, Public, International and Non-profit Finance.
A family plans its month, a government plans its year, an orphanage waits for donations. All of them think about money, but not in the same way. Who is doing the thinking decides the name and the job of the finance. That is what an exam asks you to spot: which kind of finance is this?
1. A new organization, a new kind of finance
Every organization has a financial process, and it takes a different form for each kind of organization. That difference is the basis of the classification of finance. This note covers the first four classes in the book: family, public, international and non-profit finance.
2. Family finance
In family finance you first identify where the family income comes from and how much it is. Then you decide how that income can serve the welfare of all the members. The needs are countless, so the most important expenditures are met first, on priority. Regular expenditure is set by looking at regular income.
If the income falls short, a loan can be taken from relatives, people you know or friends. For fixed assets such as a television, a refrigerator, a car or building a house, a bank loan can be arranged. And if money is left over, it can be saved for the future.
3. Public finance
Every government has its own financial management. Public finance fixes the probable areas of spending for the year and discusses the sources from which money is collected. Spending areas: roads, bridges, government educational institutions, government hospitals, law and order, defence and social infrastructure.
Income sources: income tax, value added tax (VAT), gift tax, import custom, export custom, saving certificates, prize bond and treasury bill. Notice that loan is not on the book's list. Foreign loan is a separate step, coming up in a moment.
Keep the order straight: in public finance the amount of spending is fixed first, and money is collected afterwards, according to need. Its main objective is social welfare. So it is usually non-profitable, and spending may be greater than income.
Some government-owned business organizations can also be less profitable. An example is the chemical industries under BCIC (Bangladesh Chemical Industries Corporation).
Big projects like bridges and flyovers need huge sums, and spending on state and social security can push a government into a financial crisis. Then it sometimes takes a foreign loan. This is not a regular income source but a separate step taken when the budget falls short. The book names three lenders: ADB (Asian Development Bank), the World Bank and IDB (Islamic Development Bank).
Build a government's budget for one year. Spending areas first, money after: see whether the order can run the other way.
the budgetpick the areas
Spend plan first, collect after
The amounts and the sources' limit are imaginary units, not figures from the book. The areas, sources and lenders are the book's.
Now separate the income sources from the spending areas.
sort themis money coming or going?
Income or spending
Pick up a chip, then drop it in a box.
Right. Next one.
Not yet. Ask: does this bring money to the government, or does the government spend money on it?
All in place. Taxes, customs, prize bond and treasury bill are income sources. Roads, hospitals and defence are spending areas.
4. International finance
International finance discusses and analyzes the export and import sectors. Bangladesh is mainly an import-oriented country. Every year it imports foodstuff, raw materials, machinery, medicine and petroleum. It exports jute and jute products, readymade garments and agricultural products.
When the volume of imports is greater than the volume of exports, a trade deficit appears. Remittance sent home by wage earners abroad plays a vital role in compensating for it. So international finance covers not just the export-import discussion but also the management of making up the deficit. Walk through it step by step.
step by steppress next
Trade deficit
Step 1. Imports are high Bangladesh is mainly import-oriented: foodstuff, raw materials, machinery, medicine and petroleum come in.
Step 2. Exports are low, so there is a deficit Jute, readymade garments and agricultural products go out. When imports are greater than exports, that is a trade deficit.
Step 3. Remittance compensates Remittance sent by wage earners plays a vital role in compensating for the deficit.
Now try your own numbers. Deficit = import − export, but only when the import is larger.
calculatorchange the numbers
Trade deficit calculator
The numbers are imaginary, for practice. Nothing here goes anywhere. The notebook is yours.
5. Finance of non-profit organizations
Non-profit organizations work for the welfare of mankind or serve the poor and the distressed. Their finance means finding the sources of money for service goals and making sure it is used properly. An orphanage makes no profit, yet it needs money. So it collects through grants and spends the money on development work for the orphans.
All four classes are covered. Now name the class from the situation, just as part গ of a creative question asks.
which financewhich class is this?
Which finance
Pick up a situation, then drop it in a box.
Right. Next one.
Not yet. Ask: who is doing the money planning? A family, the government, trade across borders, or a service institution?
All in place. Loans and saving belong to the family, treasury bills (an income source) and bridges (a spending area) to the government, import-export and remittance to international finance, grants and service to the non-profit.
6. Check yourself
Start with the first question.
check yourselfpick one answer
Question 1
With which kind of finance is the World Bank connected?
This is not the answer to this question. The book says: Big projects like bridges and flyovers need large money and public spending for social and state security may cause a crisis, so the government sometimes takes foreign loans from organizations like ADB, World Bank and IDB.
This is not the answer to this question. The book says: Big projects like bridges and flyovers need large money and public spending for social and state security may cause a crisis, so the government sometimes takes foreign loans from organizations like ADB, World Bank and IDB.
Right. The book says: Big projects like bridges and flyovers need large money and public spending for social and state security may cause a crisis, so the government sometimes takes foreign loans from organizations like ADB, World Bank and IDB.
This is not the answer to this question. The book says: Big projects like bridges and flyovers need large money and public spending for social and state security may cause a crisis, so the government sometimes takes foreign loans from organizations like ADB, World Bank and IDB.
In the second, read carefully what is being asked.
check yourselfpick one answer
Question 2
Which product does Bangladesh export?
This is not the answer to this question. The book says: Bangladesh is mainly import-oriented: foodstuff, raw materials, machinery, medicine and petroleum are imported;
This is not the answer to this question. The book says: Bangladesh is mainly import-oriented: foodstuff, raw materials, machinery, medicine and petroleum are imported;
Right. The book says: Bangladesh is mainly import-oriented: foodstuff, raw materials, machinery, medicine and petroleum are imported;
This is not the answer to this question. The book says: Bangladesh is mainly import-oriented: foodstuff, raw materials, machinery, medicine and petroleum are imported;
In the last one, keep income and spending apart.
check yourselfpick one answer
Question 3
Sources of income of the government-
i. gift tax ii. treasury bill iii. loan
Right. The true statements are i and ii. The book says: Government income sources include income tax, VAT, gift tax, import custom, export custom, saving certificates, prize bond and treasury bill.
This option does not match which statements are true; the true ones are i and ii. The book says: Government income sources include income tax, VAT, gift tax, import custom, export custom, saving certificates, prize bond and treasury bill.
This option does not match which statements are true; the true ones are i and ii. The book says: Government income sources include income tax, VAT, gift tax, import custom, export custom, saving certificates, prize bond and treasury bill.
This option does not match which statements are true; the true ones are i and ii. The book says: Government income sources include income tax, VAT, gift tax, import custom, export custom, saving certificates, prize bond and treasury bill.
The whole note on eight cards.
cut from the notetap to turn over
Eight cards
QuestionWhat is determined in family finance?
AnswerThe sources and amount of family income and how to use it for the members' welfare.
QuestionWhat can be done with excess money in family finance?
AnswerIt can be saved for future use.
QuestionWhat is determined first in public finance?
AnswerThe amount of expenditure.
QuestionWhat is the main objective of public finance?
AnswerSocial welfare.
QuestionWhy does the government take foreign loans?
AnswerWhen the government budget is not enough for big projects and security spending.
QuestionIncome tax and treasury bill are government income sources. What kind of step is a foreign loan?
AnswerOutside the list of income sources: a separate step when the budget falls short.
QuestionWhat is trade deficit?
AnswerThe deficit when imports exceed exports.
QuestionWhat is the main objective of finance of a non-profit organization?
AnswerIdentifying sources of money and using it properly to achieve service goals.
Source: Finance and Banking, Classes 9-10 (NCTB), Chapter 1 “Finance and Business Finance”, section 1.3.