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    CP Report

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    Industrial sickness refers to companies that are continuously making losses such that accumulated losses exceed total assets. [1] The Reserve Bank of India and State Bank of India define an industrially sick unit as one that has incurred cash losses for at least a year and is likely to continue to do so, or has an imbalance in its financial structure. [2] The Companies Act defines a sick company as one that has accumulated losses of at least 50% of its average net worth over the prior four years or has failed to repay debts for three consecutive quarters. [3]

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    CP Report

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    jnkpatel561
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    Industrial sickness refers to companies that are continuously making losses such that accumulated losses exceed total assets. [1] The Reserve Bank of India and State Bank of India define an industrially sick unit as one that has incurred cash losses for at least a year and is likely to continue to do so, or has an imbalance in its financial structure. [2] The Companies Act defines a sick company as one that has accumulated losses of at least 50% of its average net worth over the prior four years or has failed to repay debts for three consecutive quarters. [3]

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    Industrial sickness refers to companies that are continuously making losses such that accumulated losses exceed total assets. [1] The Reserve Bank of India and State Bank of India define an industrially sick unit as one that has incurred cash losses for at least a year and is likely to continue to do so, or has an imbalance in its financial structure. [2] The Companies Act defines a sick company as one that has accumulated losses of at least 50% of its average net worth over the prior four years or has failed to repay debts for three consecutive quarters. [3]

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    19 views2 pages

    CP Report

    Uploaded by

    jnkpatel561
    Industrial sickness refers to companies that are continuously making losses such that accumulated losses exceed total assets. [1] The Reserve Bank of India and State Bank of India define an industrially sick unit as one that has incurred cash losses for at least a year and is likely to continue to do so, or has an imbalance in its financial structure. [2] The Companies Act defines a sick company as one that has accumulated losses of at least 50% of its average net worth over the prior four years or has failed to repay debts for three consecutive quarters. [3]

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    INDUSTRIAL SICKNESS

    In the recent years, one of the most important problems faced by the Indian companies is the problems of growing Industrial Sickness. The incidence of Industrial Sickness is face not only by small scale Industries but also by medium and large scale Industries. The impact of sickness has been cause of considerable concern to Workers, Government, Financial Institutions and Banks, and also to the Community at large. In the simple terms Industrial Sickness is a unit or a firm which continuously making losses and the accumulated losses equal or exceeds its assets.

    The definition of Industrial sickness is given by various institutions are as follows:

    The RBI defines the sickness as " An Industrial unit is regarded as sick if it has incurred cash losses for one year, and in the judgment of financing bank is likely to incur cash losses for the current as well as following year and/or there is imbalance in the unit's financial structure, that is, when current ratio is less than 1:1 and worsening debt equity ratio." The S.B.I. defined a sick unit as As a unit which fails to generate internal surplus on a continuing basis and is depended for its survival on frequent infusion of external funds.

    The Companies (second amendment) Act, 2002 define a sick company as one : A) which has accumulated losses in any financial year equal to fifty percent or more of its average net-worth during four years immediately preceding the financial year in question , or

    B) Which has failed to repay its debts within any three consecutive quarters on demand for repayment by its creditors.

    An examination of the above definitions suggests that financial performance of a particular company gives an idea whether a company is sick or not. Financial performance of company reflects not only every action of company but also impact of external factors. Company should

    able to meet its current obligation from its income; if company is not able to generate sufficient cash to meet cash expenses then company is going towards sickness.

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