UNIT-4BBA-2

GSI

SICKNESS IN SMALL BUSINESS

Meaning• A sick Industry as “an industrial company

(being a company registered for not less than seven years) which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth and has also suffered from cash losses in such financial year immediately preceding such financial year – The sick industrial companies (special provisions) Act, (SICA) 1985

Signals and Symptoms of SicknessDecline in capacity utilizationShortage of liquid funds to meet short term

obligationsInventories in excessive quantitiesNon submission of data to banks and other

financial unitsIrregularities in maintaining bank accountsFrequent breakdowns in plants and equipmentsDecline in quality of products manufactured or

service renderedDelay or default in the payment of statutory

duesHigh attrition rate

Continuous tumble in the prices of the shares

Delay in the audit of final accountsFrequent request to banks for loans

CAUSES AND CONSEQUENCES OF INDUSTRIAL SICKNESS

I. EXTERNAL OR EXOGENEOUS CAUSES

Changes in the industrial policies of the Government Inadequate and untimely availability of necessary

inputs Lack of demand for the product Recession in the economy Frequent industrial strikes and labour unrest Shortage of financial resources especially working

cap Natural calamities like floods, drought etc

II. Internal Causes

Lack of good managementPoor implementationMarketing problemsNon-availability of raw materialsShortage of working capitalLabour troubleTechnical operational problems etc

ConsequencesHuge financial losses to the banksLoss to employment opportunitiesEmergence of industrial unrestAdverse effect on prospective investors

and entrepreneursWastage of scarce resourcesLoss of revenue to the government

CORRECTIVE MEASURES

Identification of sickness at the early stage (incipient stage) reduces deterioration

Merger of large number of sick units will be a welcome proposition

There should be a consensus among financial institutions – management and laborer on continuity and rehabilitation of suck units

There should be a separate board for the reconstruction of suck units

Rehabilitation programmes should be carried out on permanent basis.

Decision to rehabilitate a sick unit be finalized quickly, and in full swing other it may jeopardizes all efforts

Banks and financial institutions have to periodically review the accounts of small scale units.

EDP programmes have to be organized and conducted for entrepreneurs.

BEST OF LUCK