A Study on Financial Performance Evaluation of Small Scale Industries: Impact and Issues

Abstract

Small scale industries either are known as SSI or generally as the Small and Medium enterprises refer to those small entrepreneurs who are engaged in production, manufacturing or service at a micro scale. Small scale industries play a focal role in the economic and social development of India in the post-independence era. Small scale industries constitute the backbone of a developing economy with its effective, efficient, flexible and innovative entrepreneurial spirit. Round the world SSI units have been accepted originator of economic growth and for promoting equitable development. The contribution of SSIs to the Indian economy in terms of employment generation, reducing regional imbalances, promoting inter-sectorial linkages, magnifying exports and fostering equitable economic growth potential has been quite marvellous. This sector through more than 6000 products ranging from traditional to high-tech, consisting over 36 million units widely dispersed across the country provides employment to over 80 million persons, contributes about 8% to country's GDP besides accounting for 45% of manufactured output and 40% to the export from the country. The SSI sector has the perspective to spread industrial growth around the country and can be a considerable associate in the progress of comprehensive growth. The target of proposed National Manufacturing Policy of enhancing the share of manufacturing sector in GDP to 25% and to create 100 million jobs by end of 2022, as well as to take India from its present 2 trillion dollar economy to 20 trillion dollar economy can be achieved with the help of SSI units. [1] Most of the SSI units don't care about their financial position, they only run business, mostly focus on cash receipt and what their bank account position is. Accounting and financial evaluation have always been seen as the best route to a successful business career as it is considered as the language and basic tool of a business organization which helps to determine how a business is doing. The growth of the small-scale enterprises can be determined through maintenance of proper records of accounts, which provides the basis for safeguarding and controlling the business properties. We found that there are many perceived factors affecting their adoption of accounting practices and their effects on their business operations in the area. Among such factors include; lack of adequate training, wilful misconduct, and negligence. This article presents an empirical investigation of financial performance evaluation practised by SSIs and its impact.