Review of Literature

Aarti Deveshwar (2006) The Small scale Industries sector has emerged as a vibrant and
dynamic sector of Indian economy which contributes nearly 40% of the total industrial
production and over 34% of the national exports. At present this sector is providing employment
to over 250 lakhs people. It also acts as a nursery for promoting entrepreneurial talent and as a
catalyze of industrial growth through a wide network of more than three million units in the
country, according for about 95% of the total industrial units in the country. The world trading
system is constantly offering new challenges as well as creating new threats; as tariff and quotas
are removed, new technical norms, sanitary and measures and anti-dumping actions are
rendering more challenges for business in emerging economics. The WTO is bound to impact
every economic activity- the small- scale sector is no exception. WTO Agreements have thrown
up a variety of threats and challenges.

Aremu, Mukaila Ayanda (2011)Sustainable development is recognized as an essential

requirement for achieving economic goals without degrading the environment, major problems
arise in implementing the concept of sustainability. At the most basic level, researchers dealing
with sustainable development have suggested that the achievement of sustainability requires
ecologically sustainable political and economic systems, organizations, and individuals (Starik
and Rands 1995; Costanza and Daly 1992; Gallup International Institute 1992). Specifically,
governments, consumers, and enterprises contribute and play crucial roles in reaching
sustainable development. As a result, if goals of sustainability are to be achieved, small and
medium-sized enterprises must be reformed to minimize their negative ecological and social
impacts (Gladwin, 1992)

Ashok Sharma and kumar (2011), the main aim of this article is to examine the effect of
Working Capital on profitability of Indian firms. The finding of researcher shows significantly
depart from the various international markets. The result show that Working Capital
Management and profitability in positively correlated in Indian companies Research also shows
that the inventory of number of day and number of days account. Payment is negatively whereas
number of days accounts receivable and cash conversion period a positive relationship with
corporate profitability.
Ayozie Daniel Ogechukwu1 (2010) Small scale industries have a lot of important contributions
to make to the economic development of the country. By its less capital intensive and high
labour absorption nature, SSI sector has made significant contribution to employment generation
and also to the rural industrialization. This sector is ideally suited to build on the strength of the
traditional skill and knowledge, capital and innovative marketing practices. So, the importance of
small scale enterprise is a global phenomenon encompassing both the developing and developed
countries. In both developed and developing countries, the government is turning to small and
medium scale industries and entrepreneurs, as a means of economic development and a veritable
means of solving problems. Its contribution to the mobilization of domestic savings and
utilization of local resources is also a noticeable factor. It is a base for the development of
appropriate technology and provides a veritable ground for skilled, unskilled and semi-skilled
workers. It has provided
productive self-employment to a number of educated and less educated young men and women
coming out of schools, colleges, polytechnic, and universities.

Beydokhti Abbas Taleb (2007), author clearly said in his literature that The Small Scale
Industry (SSI) sector is a key of economic growth and contributes substantially to India‟s total
industrial production; export and employment generation. As a result, 3.6 million SSI units in the
country produce over 8000 items and provide employment to about million people. Small Scale
Industry unit have weak capital base of their own because they are mostly organize on
proprietary or partnership basis and are usually of very small in size. They are poorly placed in
the matter of capital formation. It is the fact the success or failure of an enterprises to a large
extent depend upon the effectiveness with which financial resource of the firms applied and
managed there is positive relationship between a firm‟s growth and working capital needs.

Bhavani T.A. (2006) the phenomena of liberalization, globalization, and rapid technological
developments are changing business environment world over for the past two decades. There has
been a shift from „policy regulation‟ to „market orientation‟ all over the world through
liberalization of the state controls on economic transactions. Globalization is taking place in the
sense that all the economies are becoming highly integrated. There have been rapid technological
developments that are drastically changing the methods of doing business. The recent
liberalization and globalization policies are not only exposing industrial units to market
competition to a greater extent but also making markets more and more competitive. These two
phenomena are together posing significant challenges to individual enterprises, Technological
developments, on the other hand, are providing opportunities to the industrial units to improve
their competitive strength so as to deal with these Challenges.

Chuthamas Chittithaworn (2011) Business success is usually the outcome of the way of doing
business and cooperation. Inter-firm cooperation, consultation, performance measurement, and
flexibility may play an important role in business success. Inter-firm cooperation contributes
positively to gaining organizational legitimacy and to developing a desirable marketplace
reputation. Cooperation also may enable the small firm to improve its strategic position, focus on
its core business, enter international markets, reduce transaction costs, learn new skills, and cope
positively with rapid technological changes. Successful firms were likely to spend more time
communicating with partners, customers, suppliers, employees. Use of outside professionals and
advisors, and the advice and information provided by customers and suppliers is also important
for business success. Networking seems to be important both between and within firms. The
results show that customer and market, and resources and finance played an important role in
ensuring the SMEs business success in Thailand. Innovative product, quality, cost, reliability,
and services are the key strategic dimension in business success. Innovative product gives added
value to the customer and it is important to achieve a suitable balance between product quality
and costs.

The Economic Survey, Government of India (2004-05) during 2000-01 to 2004-05 the SSI
sector registered continuous growth in the number of units, production, employment and exports.
During this period the average annual growth in the number of units was around 4.1%, while
employment grew by 4.4% annually. In spite of the progress mention above entrepreneurs faces
several problems. Some of the major problems faced are non-availability of timely and adequate
credit, technological obsolescence, infrastructural bottleneck, marketing constraints etc.

Gábor HUNYA,(2011) Basic legal and regulatory framework is well in place, the
implementation of the legislative framework is often cumbersome and contradictory in Romania.
Administrative procedures and formalities represent a resource-consuming burden for SMEs.
Another pressing problem is the mutual indebtedness of companies and especially the payment
arrears of the public to the private sector. Before looking for funding sources, potential
beneficiaries have to identify what are their real needs and to define clear and coherent ideas of
what they want to achieve and how.

Ganapathy S. Natarajan and David A. Wyrick (2011) Most SMEs expected information and
some expected financial support from the support programs. The different support programs
were evaluated based on how well they perform in providing information, advice,financial
support, and constant feedback. A good support program affected and improved the
environmental performance of SMEs. It was observed that public sector purchasing promoted
sustainable practices among the SMEs and in turn helped the local and regional economy. Since
public sector industries have the financial power and also improve the bottom line of the
sourcing SMEs, sustainable development was seen as feasible and economically viable.

Ghanshyam Panda(2008) Ghanshyam Panda covers the problem of raising working capital.
The utilization of bank credit by small industries and their industries in backward areas and
priority sectors, forms a special part of the study.

Harish B (2008) Quality has always been an issue in the sphere of Small and Medium
enterprises- be it the quality of the product or of the management. This issue assumes substantial
significance when the organization begins to grow in size. When there is a step-up in the
management levels, the leaders have to delegate the responsibility and authority down the line to
all individuals. Even before that the managers of small scale enterprises should ensure that
quality culture is instilled in the genes of the organization. Imbibing the ISO quality principles
early in the system in a right spirit will help the small organization to professionalize the
management and embark on a smooth path of growth.

Indian Journal of industrial relation (2004) The small scale industry occupies an important
sector of India‟s economy and accounts for 5o% of industrial production in the country and 80
per cent of the employment in the industrial sector. Its accounts for about 35 per cent of India‟s
exports earnings. If indirect export contribution of this sector is also taken into account, it is
more than 50 per cent. The SSI sector, manufacturing a wide range of more than 7500 products,
not only caters to the need of the lower income groups, but also acts as a nursery for the
development of entrepreneurial talent. It produces mass consumption items such as leather
goods, plastic parts, and ready-made garments as well as sophisticated items such as television
sets, electro-medical system, hearing aids, tape recorders, process electro instruments, etc.
Ancillary units in the small scale sector supply a wide diversity of products to original equipment
manufacturers producing bicycles, scooters, automobiles, tractors, etc. Simple machine tools
such as leather, drilling machines printing machines and cutting machines are also being made in
the small scale sector. Its contribution is next only to agriculture in India. The growth of SSI
sector in the overall industrial sector in the past eight years on an average is 8.9 per cent while in
industrial sector it is 6.7 per cent.

Jayshri J Kadam,(2011) Small scale entrepreneurs face a lot of problem while availing loan
facility form commercial banks as well as Government agencies. Financial institutions ask for a
lot of information& data, state financial corporation takes several months to take decision on
extending term loans small scale sector are not in a position to offer guarantee required by the
banking sector.

Kaburi Simeon Nyandemo (2008) this study provides a comprehensive analysis of Working
Capital Management practice in sameta division district secondary school. The paper surveys
show how secondary school teacher who are the school manage. The school cash inventories,
accounts receivable, and accounts payable. Management of school become a concern of most
people in society as there seems to lack professionalism in are of management of school finance.
Financial decision made will affect most people in society as majorly meet vested interest in the
school. The study project in corporate cash, accounts receivable and account payable
management practice of secondary school in sameta division

Kehinde James Sunday (2011)The management of working capital impacts on liquidity,

investment portfolio and profitability. All these three factors are decisive in the growth or failure
of a business. Hence, good performances in working capital management affects these decisive
factors favourably and thus, contribute to growth and success of the business. His work is based
on the theory that efficient management of working capital is very vital for a business survival
Kesseven Padachi (2006), a well-designed and implement Working Capital Management is
expected to contribute positively to the creation of a firm‟s value. The purpose of this paper is to
examine the trends in Working Capital Management and its impact on firm‟s performance. The
trend in Working Capital Management and profitability of firm are examined to identity the
causes

for any significant different between industries, it depends variable return on total assets is used
as a measure of profitability. A strong significant relationship between Working Capital
Management and profitability has been found in previous empirical work. An analysis of the
liquidity profitability and operational efficiency of the five industries shows significant change
and how best practices in the paper industry have contributed to performance. The finding also
reveals and increasing trend in the short – term component of Working Capital financing.

Ludovica Ioana (2011)The role of small and medium enterprises is worldwide acknowledged
for their unique contribution to the economic development. Both the developed countries and the
ones in course of development realise that the SMEs and the entrepreneurs play a vital role in the
industrial development of a country. So there is no surprise that the political strategists have
often thought that the SMEs can become the “seed” of economic revival. It is necessary that
while the observance of thresholds regarding the average number of employees is compulsory, a
SME can choose between observing either the threshold regarding the turnover in a year or the
one regarding the total assets. It is not necessary to satisfy both criteria and one of them can e
exceeded without losing the status of SME.

Mathur Gautam(1997), in his study entitled, “True employment and non employment” opined
that the appropriate techniques in the consumption. Goods sector will be of a low degree of
mechanization creating incidentally a lot of employment per unit of investment of scarce capital.

Malcolm S. Adiseshiah, (2001)in his study entitled, “Foreign Investment and Liberalization”
emphasized that the country needs more investment both for domestic and foreign. While
domestic investment responds to the needs of the economy, the foreign investment begins to
increase, efforts should be made to encourages this trend.Dr. Wu. Jageh, in his study entitled,
“Capital Intensity and Economic Growth under developed countries” pointed out that both the
capital out put ratio and wage capital ratio show an inverse relationship with capital intensity. He
recommends the setting up of SSI in countries having large unemployment.

MalgaWeker(1997), in his study entitled, “Problems of small Industry in Andhra Pradesh” has
found the lack of infrastructure as a general problem.The industrial estate alone cannot overcome
the vocational disadvantages. The infrastructure facilities are either very weak or non existent in
rural areas. In urban areas with necessary industrial climate and infrastructure facilities, the
growth of industries is relatively faster. The scarcity of indigenous raw materials has been a
serious bottleneck. Scarce raw materials supplied through quotas are not sufficient to meet the
demands of the units. There is a delay in the disbursement of the loans due to the existence of
procedural delays and instances of tangible securities.

Mathur and Suraj Narain (2010), the purpose of this chapter is to present a review of literature
relating to the working capital management even though Working Capital is an important
ingredient in smooth functioning of business entities. It has not attracted much attention of
scholars. Indian researcher has also conducted studies on various aspects of Working Capital.
Special studies have been undertaken mostly economists to study the dynamics inventory
investment which often represented largest component of total Working Capital.

Nopadol Rompho (2011)The Balanced Scorecard approach addresses some of the weaknesses
and vagueness of previous management approaches. It attempts to provide a clear prescription as
to what organisations should measure. It also translates vision and strategy, defines the strategic
linkages to integrating performance across an organisation, communicates objectives and
measures to a business unit, and aligns strategic initiatives. When fully implemented, it aligns
everyone within an organisation so that all employees understand how and what they can do to
support the strategy. It can also be used as a basis for compensation and provides feedback to
management as to whether the strategy is working. The Balanced Scorecard suggests that an
organisation‟s performance can be viewed from four main perspectives: financial, customer,
internal business process, and learning and growth.
Rohana Ngah and Abdul Razak Ibrahim (2011)The finding shows that the skill, knowledge
and capability of employees do not contribute to the relationship of customers and other parties.
SMEs should focus on this issue to connect its employees to the third parties which are very
important for the business future. Relational capital plays a vital role in knowledge sharing
compared to other dimensions of intellectual capital. The information and knowledge acquired
and gathered from customers, suppliers and third parties are well shared which is very important
for the organization to be ahead of competition and involve in innovation. However, human
capital and structural capital should be addressed accordingly as they are the internal resources of
the organization.

Roxana Gabriela HODOROGEL(2011) In Germany, the financial and economic crisis,

paradoxically, led to an unexpected development: the interest of individuals in establishing a
business, declining in the last years, began to grow. According to the annual report regarding the
SMEs(1), once the crisis was felt in all economic sectors, more and more people turned to
counseling services in order to open a business.

Sanjiv Mittal, Mohinder Kumar and Bhavet (2011) a strong significant relationship between
working capital and profitability has been found in previous research work. Best uses of working
capital management in small scale industry increased the liquidity, profitability, and operational
efficiency. It indicates that working capital management is of particular importance to the small
businessman.

Sayeda Talmina Quayyum (2011), this study is an attempt to investigate, If there is any
relationship between Working Capital Management and profitability of manufacturing
corporations. The purpose of this there is to figure out if there is statically significant relationship
the profitability and Working Capital Management and researcher also explained management
taking active part to maximum their liquidity and profitability and various Working Capital
Components. This paper also shows that the significance level of relationship differ firm industry
to industry.
Srinivasan. R. (1997) Ramani quotes in State Bank of India Report which identified that
financial management, lack of planned and organized approach are the major cause of failure.
However in his study of 20 units, he finds management failure as the single largest contributing
factor. He also found problems with governmental procedures and consequent delays
contributing to the malaise. However these and other studies also refer to the problem and
importance of marketing function on the need for planning and organizing for marketing.

Srinivasulu bayineni (2007) The small scale industry which plays a key role in the Indian
economy in terms of employment and growth has recorded a high rate of growth since
independence. Till 1956, the number of small scale units was 6195. Today it stands at 35.72
lakhs. The inherent advantages of small scale units are reduction of regional imbalances, low
investments, greater operational flexibility, low cost of production high capacity to innovate and
export, greater geographical dispersal, utilization of local material and human resources. In terms
of employment, it employs 199.65 lakh persons and is the second largest employer of India‟s
workforce after agriculture. Today, there is a global recognition for the small enterprises as they
could very well be or become the backbone of the economy.

Sundarsana Reddy and Raghunatha Reedy (2007), Working Capital Management has been
greater importance in small scale industrial units but most of these have not strong financial at
ground base level and limited accessibility to financial market. The working capital practices in
small and medium enterprises are more owner centric than professionally managed. In his study
it is found that the working capital management differs among business persons. Small Scale
Industry sickness has repeatedly emphasized the need for adequate working capital.

Zahra Mousavi and Azam Jari (2009), Working Capital Management is one of the most
important financial decision in corporate. The optimum management of Working Capital will
increase the corporate value so the primary goal of research is evaluating relationship between
Working Capital Management and corporate performance. We used factors such as return on
total assets return on owners‟ equity and market value to book value ratio for evaluating
corporate performance and net liquidity balance as criterion for evaluating of Working Capital
Management results show that there are positive relationship between Working Capital
Management and corporate.