A Study of Working Capital Management in SSI- A Conceptual Framework

Abstract

The role played by small business in the economic activity of Indian history since practically the beginning of the recorded time is significant. SSls are the backbone of our industrial structure as they provide a variety of non-traditional, low technology products. They are also engaged in the processing, preserving, manufacturing & servicing activities and play a vital role in balanced and sustainable economic growth. Thus, a proper development of SSIs is essential for the healthy growth of economy. Working capital typically means the firm's current or short-term assets such as cash, receivables, inventory and marketable securities. The capital of a business which is used in its day-by-day trading operations, calculated as the current assets minus the current liabilities. Working capital is also called operating assets or net current assets. Working capital management is concerned with the problems that arise in attempting to manage the current assets, the current liabilities and the interrelations that exist between them. Working capital management plays a vital role for small scale industries in their day to day operations. The decision of working capital management is an important aspect for small scale industries because management of current assets and current liabilities represented mainly by cash, inventories, bills receivables and bills payable is a continuous process. Working capital requirements differ widely depending on the length of the manufacturing cycle, market characteristics etc. Working capital needs are volatile in nature due to seasonal variations in sales.
JEL Classification : E 22, L 11, L 16, M 49.