Question

Write short notes of the following.

Sickness in small business enterprises.

Answer 1

The small units which are financially unstable are known as sick units. According to the Reserve Bank of India:
“A sick unit is that which has incurred cash loss for one year and likely to continue incurring losses for the current year as well as in the following year and the unit has an imbalance in its financial structure such as current ratio is less than 1:1 and there is worsening trend in debt equity ratio.”
In India, this problem of being sick can be seen in cotton, jute, sugar, textile, small steel and engineering industries.
Generally, there are two causes for sickness:
1. Internal causes
2. External causes