FINANCIAL FINANCIAL MANAGEMENT IN MANAGEMENT IN

SMALL SCALE SMALL SCALE INDUSTRYINDUSTRY

FINANCIAL MANAGEMENTFINANCIAL MANAGEMENT

1. Managerial Finance Function 1. Managerial Finance Function

* Estimating finance requirements* Estimating finance requirements

* Identify source of finance* Identify source of finance

* Rising of finance* Rising of finance

* Proper use of finance* Proper use of finance

* Control of finance* Control of finance

2. Routine Finance Function:2. Routine Finance Function:* Cash receipts and payment* Cash receipts and payment* Safeguarding cash balance* Safeguarding cash balance* Record keeping and accounting* Record keeping and accounting* Custody and safeguarding securities* Custody and safeguarding securities* Taking care of mechanical details * Taking care of mechanical details

outside outside finance finance* Regular returns of borrowed funds* Regular returns of borrowed funds

3.Working Capital Management:3.Working Capital Management:

A. A. FIXED ASSET:FIXED ASSET:

* Land and building* Land and building

* Plant, machinery and equipment* Plant, machinery and equipment

* Fictures and fittings* Fictures and fittings

* Motor vehicle* Motor vehicle

* Investment * Investment

B. CURRENT ASSET:B. CURRENT ASSET:

* Stock* Stock

* Work in progress* Work in progress

* Finished goods* Finished goods

* Bank accounts* Bank accounts

* Cash in hand* Cash in hand

C. LIABILITIES:C. LIABILITIES:

*Source of finance*Source of finance

*Liabilities should not be considered as deads*Liabilities should not be considered as deads

*Current liabilities are generally dead*Current liabilities are generally dead

1. Trade creditors1. Trade creditors

2.Taxation provision2.Taxation provision

3.Short term loans3.Short term loans

4.Dividend payable4.Dividend payable

5.Bank overdraft5.Bank overdraft

ISRAELI ISRAELI CASE STUDYCASE STUDY

SMALL SCALE INDUSTRYSMALL SCALE INDUSTRY

Small Scale Industries is Small Scale Industries is a term which has been a term which has been recently used by recently used by scholars to describe the scholars to describe the phenomena of the phenomena of the creation of small creation of small industries and other industries and other income generating income generating projects all around the projects all around the developing world. developing world.

CONCEPTUAL APPROACH-THE SETUPCONCEPTUAL APPROACH-THE SETUP

Brandt reportBrandt report - unable to - unable to exploit its own resources in exploit its own resources in an optimal way, for the an optimal way, for the benefit of its population benefit of its population

ArnonArnon - The land is divided - The land is divided up unequally, and its up unequally, and its possession is arbitrary. possession is arbitrary.

There is a shortage of There is a shortage of educated qualified labour educated qualified labour

They are living in a They are living in a traditional setup.traditional setup.

Then their income - in Then their income - in the order of $US100 to the order of $US100 to $US300. $US300.

But the real value of the But the real value of the US dollar has US dollar has tremendously dropped tremendously dropped down.down.

THE PROBLEMTHE PROBLEM

Arnon describes Arnon describes vicious vicious circlecircle

People live in conditions of People live in conditions of low productivity -low productivity -underemployment - very underemployment - very low annual income - low low annual income - low capacity of saving - unable capacity of saving - unable to invest in their farms - to invest in their farms - yields remain low, as well yields remain low, as well as the productivity of the as the productivity of the farmer - bound to stay farmer - bound to stay within the within the vicious circlevicious circle

False solutionsFalse solutions

There were two major mistaken trends in the developmental There were two major mistaken trends in the developmental policies of many international agencies.policies of many international agencies.

1. The first trend arose from the desire to find a way to1. The first trend arose from the desire to find a way tobreak through the vicious circle. So that we can createbreak through the vicious circle. So that we can create

in the traditional rural areas Non-Agricultural Employment in the traditional rural areas Non-Agricultural Employment possibilities.possibilities.

2. The second mistake is the negligence and the almost total 2. The second mistake is the negligence and the almost total abandon of rural areas in many countries' development abandon of rural areas in many countries' development programs. The out come of this policy was, and is now as well, programs. The out come of this policy was, and is now as well, the struggle against rural exodus, or as it is also called, the the struggle against rural exodus, or as it is also called, the urban drift.urban drift.

A WAY OUTA WAY OUT

The bulk of national The bulk of national investments go to rural investments go to rural areas, a part to agriculture areas, a part to agriculture and a part to industries (this and a part to industries (this goes as well to SSI). goes as well to SSI). Investment in agriculture Investment in agriculture gives the following results: gives the following results: Productivity , Productivity , Underemployment is Underemployment is diminished diminished

PROLEM OF PROLEM OF PRODUCTION.PRODUCTION.

TRIANGLE OF PRODUCTIONTRIANGLE OF PRODUCTION

TRIANGLE OF PRODUCTIONTRIANGLE OF PRODUCTION

For production we need to For production we need to have the necessary finance have the necessary finance

MarketingMarketing Producer - pay the highest Producer - pay the highest

possible price for credit and possible price for credit and inputs, and get the lowest inputs, and get the lowest price for their produce.price for their produce.

Solution - Creation of one Solution - Creation of one cooperative belonging to the cooperative belonging to the producers producers

Small Scale Industries – Small Scale Industries –

the Israeli Case Studythe Israeli Case Study   Industry in the Kibbutz: Industry in the Kibbutz:

kibbutzkibbutz – collective – collective village, unique by its village, unique by its spectacular spectacular transformation of transformation of economic and social life economic and social life in a rural community in a rural community

Agricultural production Agricultural production unit , farming – good unit , farming – good economyeconomy

Drive - farming became modernized Drive - farming became modernized First move happened from the beginning of the First move happened from the beginning of the

Kibbutz existence Kibbutz existence The second move is the introduction of non-The second move is the introduction of non-

farming branches in the Kibbutz such as farming branches in the Kibbutz such as industries industries

There was a move from agricultural There was a move from agricultural employment towards Non-Agricultural employment towards Non-Agricultural Employment in the workforce of the kibbutz Employment in the workforce of the kibbutz

The share of Kibbutz industries in the Israeli economy is 6% The share of Kibbutz industries in the Israeli economy is 6% of sales, 7.3% in export, 5% of annual investments and 6.1% of sales, 7.3% in export, 5% of annual investments and 6.1% of Industrial employment (1993 figures). There are 415 of Industrial employment (1993 figures). There are 415 enterprises in the different Kibbutz villages in Israel.enterprises in the different Kibbutz villages in Israel.

There are 22000 workers employees who achieved average There are 22000 workers employees who achieved average annual sales per worker of $100000, and total sales reached annual sales per worker of $100000, and total sales reached $2.3 billion, and a total export value of $733 million. It is $2.3 billion, and a total export value of $733 million. It is interesting to update some of these figures by mentioning that interesting to update some of these figures by mentioning that in 1995 the total sales of kibbutz industry were of the value of in 1995 the total sales of kibbutz industry were of the value of $3.3 billion and the total export value was $1.04 billion and $3.3 billion and the total export value was $1.04 billion and gave employment to 25000 workers, including non members gave employment to 25000 workers, including non members of the kibbutz. of the kibbutz.

  Kibbutz Industry - a Case StudyKibbutz Industry - a Case Study

Kibbutz Givaat Brener was established Kibbutz Givaat Brener was established "Rimon" is a food processing industry -first industry "Rimon" is a food processing industry -first industry

in this Kibbutz. production turnover of more than $10 in this Kibbutz. production turnover of more than $10 million annually.million annually.

"Matar" is a metal industry in the irrigation field "Matar" is a metal industry in the irrigation field "Kol Gil" is a furniture industry "Kol Gil" is a furniture industry "Gavish Software" is a more recent industry"Gavish Software" is a more recent industry "Matpera" is a small textile enterprise "Matpera" is a small textile enterprise "Bengali" is the most recent firm and is in effect a "Bengali" is the most recent firm and is in effect a

SSI SSI

Kibbutz branches connects with our notion of developing Kibbutz branches connects with our notion of developing NAE (Non-Agricultural Employment) within the rural NAE (Non-Agricultural Employment) within the rural community, as a solution to the underemployment existing community, as a solution to the underemployment existing among most rural population around the world.among most rural population around the world.

GROUP MEMBERSGROUP MEMBERS

R.SUBHARAR.SUBHARA 20062774 20062774 V.SUGANTHIV.SUGANTHI 2006277520062775 N.SUJIN.SUJI 2006277620062776 VAISHALIVAISHALI 2006277920062779