INDUSTRIAL SICKNESS

Monirba {Allahabad university} Supported by Manish kanojia (MBA III sem} BY: NIRMAL KUMAR M.B.A. 3rd SEM

DEFINITION
According to R.B.I. A unit is considered sick if it has incurred cash losses for one year, and, in the judgment of the financing bank, is likely to incur cash losses for current as well as for the following year, and/or there is an imbalance in the units financial structure, that is, when the ratio of current assets to current liabilities is less than 1:1, and debt equity ratio is worsening

According to SICA, 1985 A unit was defined as 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 cash losses in such financial year and the financial year immediately preceding such financial year.

Definition according to companies Act,2002

Sick industrial company means an industrial company which has :

Accumulated losses in any financial year which are equal to 50 percent or more of its average net worth during four year immediately preceding such financial year

Failed to repay its debts within any three consecutive quarter on demand made in writing for its repayment by a creditor of such company.

CAUSES OF INDUSTRIAL SICKNESS

INTERNAL CAUSES (A) FINANCE QUADRANT 1.Inappropriate finance mix. 2.Poor utilization of assets. 3.Improper working capital management. 4.Absence of, or poor financial planning.

(B) PRODUCTION QUADRANT 1.Wrong site selection. 2.Inappropriate plant and machinery. 3.Inadequate maintenance of plant and machinery. 4.Poor management and control of inventory. 5.Absence of innovation and R&D work

(C) MARKETING QUADRANT 1.Wrong demand forecasting. 2.Poor product mix selection. 3.Absence of product planning.

4.Dependence on a few buyers. 5.Inappropriate sales promotion measures.

(D) PERSONNEL QUADRANT 1.Poor manpower planning. 2.Ignorance to behavioral approach. 3.Poor industrial relations. 4.Absence of a good system of performance evaluation. 4.No recognition and appreciation to better performance.

EXTERNAL CAUSES

1.Poor industrial infrastructure in the areas where the unit is operational.

2.Delays in sanction and disbursement of assistance. 3.Government policies and taxation. 4.Non- availability of professional and skilled manpower.

STAGES IN THE LIFE CYCLE OF SICKNESS

1.Normal Stage.
2.Tending sick stage. 3.Incipient sickness stage.

4.Completely sick stage.