MGT602 Final Term Subjective 2011

SSIC functions n goals. 5Marks

Sindh Small Industries Corporation (SSIC)

SSIC was established in 1972 having motives to indulge into promotional activities of smallscale industries in Sindh. The objectives of SSIC include financial assistance, education of craftsman, census and survey of cottage and small industries, procurement and distribution of raw materials to artisans and craftsman. SSIC was also involved in the Prime Minister’s selfemployment scheme for the dispersal of the micro credits.

Industrial Estates and Colonies :-The SSIC has established 17 industrial estates in Sindh. Total number of plots developed there are 1938 and there are 302 units working utilizing 571 plots. There are six different craftsman colonies established having 92 shops.

Financing Schemes:-The SSIC also launched a credit scheme in 88,/89. The rate of markup was 7% for industrial estates and 11% for factories outside the industrial estates. The scheme was discontinued in 1993 due to shortage of funds although SSIC has created already 526 jobs and disbursed 20.6 million rupees. In October 1992, a self-employment scheme was started for locally manufactured machinery (LMM). The loan ceiling is 1 million with the markup rate of 14%. The total amount disbursed to 171 units is rupees 98 million. The recovery rate is 47%.

Flexibilities of S Corporation. 5marks

S Corporation combines the tax advantages of the partnership and the corporation. In 1996 Small Business Protection Act, rules governing the S corporation were considered too rigid. The new law provides more flexibility with regard to:

a. Number of shareholders. b. Who can be allowed to own shares? c. The role of trusts as stockholders. d. The ability of S corporations to own more than 90 percent of stock of another corporation. e. Distribution of profits. f. Issuance of different classes of stock. g. Rules affecting the tax basis of incurred loses. Limited liability corporations are still more flexible than the S corporation, but conversion entails a significant cost. More than half of all S corporations have only one shareholder, which would not be possible as an LLC.

Problems in incorporating intrapreneurship in an organization. how can these prbs be over -come. 5marks

PROBLEMS AND SUCCESSFUL EFFORTS

Intrapreneurship, also called corporate venturing, is not without problems. One study found that new ventures started within a corporation performed worse than those started independently. Independent start-ups tend to outperform corporate start-ups. There are many examples of companies that have successfully implemented intrapreneurship. 3M allows employees to devote 15 percent of their time to independent projects. After failing to recognize the potential of Wozniak’s personal computer, Hewlett-Packard has taken steps to take advantage of future opportunities. Even IBM has developed the independent business unit concept. The problems of intrapreneurship are not insurmountable, and the concept can lead to new products, growth and the development of an entirely new corporate environment and culture.

Importance of cash flow & its management. 5 marks

It is important for the entrepreneur to make monthly projections of cash, pro forma cash flow.

1. If disbursements are greater than receipts in any time period, funds will have to be borrowed or cash reserve tapped.
2. Large positive cash flows may need to be invested in short term sources.
3. Usually the first few months of start-up will require external cash in order to cover cash outlays.

role of NGOs 3 marks

The Role of NGOs

The NGOs are working on socio-economic sector in the development of SMEs. They are privately owned organization registered under the social welfare act. They normally work through grants, aids or donation based finances. They are having a very constructive role in the SME development. The special property of this sector is gender development. They at some places tried to replicate Grameen banks model.

Q1. How Much the Attractiveness the Entrepreneurs has for raising Capital while running different forms of Ventures (3 marks)

Attractiveness for Raising Capital

• In both the proprietorship and partnership, the ability to raise capital depends on the success of the business and personal capability of the entrepreneur.
• Because of its limitations on personal liability, the corporation is the most attractive form for raising capital.

Q2. Under which condition an Entrepreneur may go for a long-term debt? What are its Major Sources?

Answer: The entrepreneur may need to borrow funds to finance assets and meet cash needs. Fixed assets are usually financed by long-term debt borrowed from a bank. Alternatives include borrowing from family members, having partners contribute more funds or selling corporate stock. Many of these options require the entrepreneur to give up some equity.

Q4. Differentiate the operating Budget from Capita Budget. (5 marks)

OPERATING AND CAPITAL BUDGETS

A. before developing the pro forma income statement, the entrepreneur should prepare operating and capital budgets.

1. If the entrepreneur is a sole proprietor, he or she will be responsible for the budgeting decisions.
2. In a partnership, or where employees exist, the initial budgeting process may begin

with one of these individuals.

3. Final determination of budgets will ultimately rest with the owners or entrepreneurs.

The operating budget is an important document, as the pro forma income statement will only reflect the actual costs of goods.

5. Discuss the function of small Industries Development Board (SIDB) NWFP.

Small Industries Development Board (SIDB) NWFP

The SIDP was established in 1972. It is playing a promotional role to support and assist the development of small and cottage industry in the province. The SIDB is an autonomous body, focusing on manpower training, model projects and industrial infrastructure. It has 14 regional offices in the different cities of NWFP.

Training Centers

SIDB has established carpet centers in five cities of NWFP and has trained 1327 number of trainees. The SIDB has established “Patti” training centers, textile training and “gabba” training centers which has trained 151 trainees.

Development Programs and Model Projects

SIDB has also launched various women development programs, which has trained 2062 women trainees in a number of fields of work. The SIDB is also involved in establishing other various