ED

UNIT V
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 Sickness
Decline in capacity utilization
Shortage of liquid funds to meet short term
obligations
Inventories in excessive quantities
Non submission of data to banks and other financial
units
Irregularities in maintaining bank accounts
Frequent breakdowns in plants and equipments
Decline in quality of products manufactured or
service rendered
Delay or default in the payment of statutory dues
High attrition rate
Continuous tumble in the prices of the shares
Delay in the audit of final accounts
Frequent 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 management

Poor implementation
Marketing problems
Non-availability of raw materials
Shortage of working capital
Labour trouble
Technical operational problems etc
 Consequences
Huge financial losses to the banks
Loss to employment opportunities
Emergence of industrial unrest
Adverse effect on prospective investors and
entrepreneurs
Wastage of scarce resources
Loss 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