This document discusses sickness in small businesses. It defines a sick industry according to the Sick Industrial Companies Act of 1985. It then lists common signals and symptoms of sickness, such as declining capacity utilization, shortage of liquid funds, excessive inventories, and irregular bank account maintenance. The document outlines internal and external causes of industrial sickness, including poor management, marketing problems, lack of demand, and natural disasters. Consequences are huge financial losses, loss of employment, and adverse effects on investors. The document recommends corrective measures like early identification of sickness, mergers of sick units, consensus among stakeholders on rehabilitation, and periodic review of small business accounts.
2. 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
3. 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
4. Continuous tumble in the prices of the shares
Delay in the audit of final accounts
Frequent request to banks for loans
5. 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
6. 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
7. 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
8. 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
9. 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.