project and reports. project project: a whole complex of activities involved in using resources to...

Project and Reports

Project Project: A whole complex of activities involved in using resources to gain benefits A Project has three attributes (i) A course of action (ii) Specific objectives and (iii) Definite time perspectives.

Project Classification Project classification helps in expressing and highlighting the essential features of project. The following are some of the important classification of projects. (1) Quantifiable and Non-Quantifiable Projects Quantifiable projects are those in which possible quantitative assessment of benefits can be made. Non-quantifiable projects are those where such assessment is not possible. Projects concerned with industrial development, power generation, mineral development fall in the first category while projects involving health, education and defense fall in the second category.

(2) Sectional Projects Here the classification is based on various sectors like Agriculture and allied sector Irrigation and power sector Industry and mining sector Transport and communication sector Information technology sector

(3) Techno-Economic Projects Classification of projects based on techno- economic characteristic fall in this category. This type of classification includes factors intensity-oriented classification, causation oriented classification as discussed below. (a) Factor intensity-oriented classification: Based on this projects may be classified as capital intensive or labour intensive if large investment is made in plant and machinery the project will be termed as capital intensive. On the other hand project involving large number of human resources will be termed as labour intensive.

(b) Causation-oriented classification: On the basis of causation, projects can be classified as demand based and raw material based projects. The availability of certain raw materials, skills or other inputs makes the project raw-material based and the very existence of demand for certain goods or services make the project demand-based. (c) Magnitude-oriented classification: This is based on the size of investment involved in the projects, accordingly project are classified into large scale, medium-scale or small-scale projects.

Project Identification Collection, compilation and analysis of data to locate potential opportunities for starting business. Opportunity is a business concept, which if turned into a tangible product or service, by the enterprise, will result into profit.

Business Idea A business idea is a concept which can be used for commercial purposes. It typically centres around a commodity or service that can be sold for money. The characteristics of a promising business idea are: Fulfils a customer need a problem is solved Innovative Unique Clear focus Profitable in the long term

Opportunities are of three types An additive opportunity more fully exploits already existing resources. It does not change the character of the business. The risks are small, so are the returns. The complementary opportunity will change the structure of the business. It offers something new which, when combined with the present business, results in a new total larger than the sum of its parts. A complementary opportunity carries considerable risk.

The breakthrough opportunity changes the structure, strategies and characteristics of the business. New ideas, new technologies brings in fundamental change. It requires major spending on research and development. And the risk is always great.

Idea Generation The process of project selection starts with idea generation. In order to select most promising and profitable project, the entrepreneur has to generate large number of ideas about the possible projects he can take.

Sources of Ideas The project ideas can come from various internal and external sources. These may include: (i) Knowledge of potential customer needs. (ii) Personal observation of emerging trends in demand (iii) Scope for producing substitute product. (iv) Trade and professional magazines (v) Departmental publications of various departments of the government. (vi) Success stories of known entrepreneurs or friends or relatives. (vii) A new product introduced by the competitor.

Project Selection A project selection is based on certain factors such as Compatibility with the promoter Consistency with the government priorities Availability of resources Adequacy of market-Total present domestic market, competitors and their market share, sales and distribution system. Socio Demographic sector: Population trends, income distribution, attitudes towards consumption and investment. Technology Equipment Investment Location The process involved in selecting a project out of few projects is also termed as Zeroing in Process.

SWOT for Project Selection A tool is generated is used for project selection called SWOT analysis. An entrepreneur analyses his strengths and weaknesses as well as opportunities and threats offered by each of the project ideas. SWOT analysis is used to evaluate the current position of your business to determine a management strategy for the future.

Strengths The Strengths can be considered as anything that is favourable towards the business Good financial position Skilled workers Latest machinery installed Own premises Excellent transport links Little or Non threatening competition

Weaknesses Poor financial position Unskilled workforce Machineries not upto date Rented premises Poor location for business needs stock problems Too much waste

Opportunity Good financial position creating a good reputation for future bank loans and borrowings Skilled workforce means that they can be moved and trained into other areas of the business Competitor going bankrupt (Takeover opportunity) Broadband technology has been installed in the area (useful for Internet users) Moving a product into a new market

Threats Large and increasing competition Rising cost of Wages (Basic wage, etc) Local authority refusing plans for future building expansion Increasing interest rates (increases borrowing repayments, etc)

Project Report A project report or a business plan is a written statement of what an entrepreneur proposes to take up. A well evolved course of action devised to achieve the specified objectives within a specified period of time.

Purpose of Project report The project report is like a road map it describes the direction the enterprise is going in, what its goals are, where it wants to be, and how it is going to get there. Project report is prepared to attract lenders and investors. It is beneficial for small scale enterprises which apply for financial assistance from the financial institutions and commercial banks.

Project Formulation Project formulation is done to ensure the best utilisation of minimum possible resource to yield the maximum possible results. It involves step by step investigation and development of project idea. Project formulation lays the foundation for the final selection of an investment proposal after a comparative analysis of all the investment proposal.

Formulation is a process in which an entrepreneur makes an objective and independent assessment of the various aspects of a project idea for determining its total impact and also its liabilities. Stages of Project Formulation 1. Feasibility analysis 2. Techno-Economic Analysis 3. Project Design and Network Analysis 4. Input Analysis 5. Financial Analysis 6. Cost-Benefit Analysis 7. Pre-Investment Analysis

Project Report (1) General information (2) Project description (3) Market potential (4) Capital costs and sources of finance (5) Assessment of working capital requirements (6) Other financial aspects (7) Economical and social variables (8) Project implementation

General Information Bio-data of promoter: Name and address, qualifications, experience and other capabilities of the entrepreneur. Industry profile: A reference analysis of industry to which the project belongs, e.g., past performance; present status, its organization, its problems etc. Constitution and organization: The constitution and organization structure of the enterprise; in case of partnership firm its registration with registrar of firms etc. Product details: Product utility, product range, product design, advantage to be offered by the product over its substitutes if any

Project description Site: Location of the unit; owned, rented or leasehold land etc Physical Infrastructure (a) Raw material (b) Skilled labour: Availability of skilled labour in the area i.e., arrangements for training labourers in various skills. (c) Utilities: These include: (i) Power: Requirement of power, load sanctioned, availability of power (ii) Fuel: Requirement of fuel items such as coal, coke, oil or gas (iii) Water: The sources of water, quality and quantity available. (d) Pollution control: The aspects like scope of dumps, sewage system, sewage treatment plant etc., should be mentioned. (e) Communication and transportation facility: The availability of communication facilities, e.g., telephone, fax, telex, internet etc., should be indicated. Requirements for transport, mode of transport, potential means of transport etc

(f)Production process : Process involved in production and period of conversion from raw material into finished goods. (g) Machinery and equipment: A complete list of machines and equipments required indicating their size, type, cost and sources of their supply. (h) Capacity of the plant: The installed licensed capacity of the plant along with the shifts. (i) Technology selected: The selection of technology, arrangements made for acquiring it. (j) Other common facilities: Availability of common facilities like machine shops, welding shops and electrical repair shops etc (k) Research and development: Proposed research and development activities to be undertaken in future.

Market Potential (a) Demand and supply position: State the gap between the total expected demand for the product and present supply position and how much gap will fill up by the proposed unit. (b) Expected price: Expected price of the product to be realized should also be mentioned. (c) Marketing strategy: Arrangements made for selling the product. (d) After sales service: Depending upon the nature of the product, provisions made for after-sales should be stated in the project report.

Capital Costs and Sources of Finance An estimate of the various components of capital items like land and buildings, plant and machinery, installation costs should be given in the project report. The sources should indicate the owners funds together with funds raised from financial institutions and banks. Assessment of Working Capital The requirement for working capital and its sources of supply should clearly be mentioned.

Other Financial Aspects To adjudge the profitability of the project to be set up, a projected profit and loss account indicating likely sales revenue, cost of production, allied cost and profit should be prepared. Economical and Social Variables (i) Employment Generation (ii) Import Substitution (iv) Exports (v) Local Resource Utilization (vi) Development of the Area

Project Implementation Every entrepreneur should draw an implementation scheme or a time-table for his project to the timely completion of all activities involved in setting up an enterprise.

NETWORK ANALYSIS Activities represented in the form of a graphical portrayal it is called as network.

Project Management Project management generally consists of three phases. Planning: Planning involves setting the objectives of the project. Identifying various activities to be performed and determining the requirement of resources such as men, materials, machines, etc. The cost and time for all the activities are estimated, and a network diagram is developed showing sequential interrelationships (predecessor and successor) between various activities during the planning stage. Scheduling: Based on the time estimates, the start and finish times for each activity are worked out,critical path is identified, along with the slack and float for the non-critical paths. Controlling: Controlling refers to analyzing and evaluating the actual progress against the plan. Reallocation of resources, crashing and review of projects with periodical reports are carried out.

CPM and PERT A convenient analytical and visual technique of PERT and CPM prove extremely valuable in assisting the managers in managing the projects. PERT PERT stands for Project Evaluation and Review Technique developed during 1950s. The technique was developed and used in conjunction with the planning and designing of the Polaris missile project. The PERT is primarily a scheduling technique. It shows any job or project as a set of processes of operations called activities which must take place in a certain sequence. It is a probabilistic model and introduces uncertainties in project network. USED IN : Project management - for non-repetitive jobs (research and development work), where the time and cost estimates tend to be quite uncertain. This technique uses probabilistic time estimates.

CPM CPM stands for Critical Path Method which was developed by DuPont Company and applied first to the construction projects in the chemical industry. The CPM is generally used to find the optimum project cost and time. The optimum project cost is the minimum cost at which the project can be completed. USED IN : Production management - for the jobs of repetitive in nature where the activity time estimates can be predicted with considerable certainty due to the existence of past experience.

35 PERT/CPM Chart Task. A project has been defined to contain the following list of activities along with their required times for completion: Activity No ActivityExpected completion time Dependency 1.Requirements collection5- 2.Screen design61 3.Report design71 4.Database design22,3 5.User documentation64 6.Programming54 7.Testing36 8.Installation15,7 a. Draw a PERT chart for the activities. b. Calculate the earliest expected completion time. c. Show the critical path.

PERT/CPM CHART 1 2 3 4 5 6 8 7 5 6 2 6 53 1 T E = 5 T E = 11 T E = 12 T E = 14 T E = 20 T E = 19 T E = 22 T E = 23

Difference PERTCPM It is event oriented approachIt is an activity oriented approach It allows uncertaintyIt does not allow uncertainty It is probabilistic modelIt is deterministic model It is time basedIt is cost based It averages timeIt does not average time It has three estimates of timeIt has single time estimates It is suitable when high precision is required It is suitable where reasonable precision is required.

CPM/PERT components Merge and Burst Events One or more activities can start and end simultaneously at an event Dummy Activity An imaginary activity which does not consume any resource and time is called adummy activity. Dummy activities are simply used to represent a connection between events in order to maintain a logic in the network. It is represented by a dotted line in a network

RULES IN CONSTRUCTING A NETWORK 1. No single activity can be represented more than once in a network. The length of an arrow has no significance. 2. The event numbered 1 is the start event and an event with highest number is the end event. Before an activity can be undertaken, all activities preceding it must be completed. That is, the activities must follow a logical sequence (or interrelationship) between activities. 3. In assigning numbers to events, there should not be any duplication of event numbers in a network. 4. Dummy activities must be used only if it is necessary to reduce the complexity of a network. 5. A network should have only one start event and one end event.

PERT CPM Problem

Example ActivityTime required to complete activity (days) 1-28 1-33 3-42 2-55 4-56 4-64 5-65

Project Appraisal Project appraisal means the assessment of project in terms of its economic, social and financial viability. It is a complete scanning of the project. Usually banks and financial institutions conduct a critical appraisal of projects,which are submitted to them by the entrepreneur for getting loans. It involves calculating the feasibility of the project before committing resources to it.

Types of Project Appraisal Economic analysis: Economic appraisal measures the external benefits and costs of the project as well as the impact of the proposal on the organisation. Enhanced Services Increased Employment Larger Government Revenues Higher Standard of Living Improved National Income Improved Income Distribution Financial Analysis: Financial appraisal are concerned with the money flows to and from the organisation.

Cost of project Financial Soundness Sources of finance Cash flow of the project. Cost of Production Return on Investment Market analysis: Financial institutions study the marketing scope of the project and also its worth to the national economy by analyzing the consumption pattern and the potential demand for the project. Market analysis covers the following: Anticipated market for the product Analysis of market opportunity and specifying marketing objectives Planning the process of marketing the product Life cycle of the product

Technical analysis: Location and site: The important factors that influence industrial location are raw material, proximity to market, availability of water, power, transportation facilities, man power, labor laws, taxes, incentives, subsidies etc. Size of the plant/scale of operation: The size of the plant determines the economic and financial liability of a project.

Other Technical Factors Technology selected Capacity/Size of the project Selection of plant, machinery and equipment Plant layout and factory building

Organisation Analysis: Financial institutions stress on the need of an efficient organization and responsible management for the execution of the project. The objective is to make sure that the project is adequately carried out. The various organizational aspects are organization, structure, recruitment, training and development comes under this analysis.

FEASIBILITY ANALYSIS Feasibility analysis is the process of evaluating the future of a project idea within the limitations of the project implementing body and the constraints imposed on the project situation by the environment. The analysis is undertaken to determine the desirability of investing in further development of project idea.

Project Formulation The process of studying a selected project further with reference to investment decisions is called project formulation. It considers issues such as relevance and feasibility of the project. It involves a step-by- step procedure to investigate and develop project further.

Plant Layout Plant layout refers to the arrangement of physical facilities such as machinery, equipment, furniture etc. in a planned manner within the factory premises to achieve quickest flow of material at the lowest cost least amount of handling in processing the product from the receipt of material to the shipment of the finished product. Plant layout ideally involves allocation of space and arrangement of equipment in such a manner that overall operating costs are minimized.

Types of Layout Product or line layout Process or functional layout Fixed position or location layout Combined or group layout

Product layout Machines and equipments are arranged in one line depending upon the sequence of operations required for the product. Materials are fed into the first machine and the output of one machine becoming input of the next e.g. in a paper mill, bamboos are fed into the machine at one end and paper comes out at the other end.

Example of Product layout A line layout for two products is given below. Product A Lathe----- Drill------- Grinder------ Assembly -- -----Paint shop Product B Planer---- Grinder ----Miler--- Lathe---- Welding

Advantages Low cost of material handling Continuous flow of work Optimum use of floor space. Smooth and uninterrupted operations Shorter processing time or quicker output Simple and effective inspection of work and simplified production control Lower cost of manufacturing per unit Disadvantages Breakdown of one machine will hamper the whole production process Lesser flexibility as specially laid out for particular product.

Suitability: Product layout is useful under following conditions: Mass production of standardized products which involves continuous manufacturing process e.g.chemicals, sugar, paper, rubber, refineries, cement, automobiles, food processing and electronics etc.

Process Layout In this type of layout machines of a similar type are arranged together at one place. E.g. Machines performing drilling operations are arranged in the drilling department, machines performing casting operations be grouped in the casting department.

Advantages There is high degree of machine utilization, as a machine is not blocked for a single product. Breakdown of one machine does not result in complete work stoppage Supervision can be more effective and specialized Disadvantages: Material handling costs are high due to backtracking Time gap or lag in production is higher Work in progress inventory is high needing greater storage space

Suitability: Process layout is adopted when Products are not standardized Quantity produced is small There are frequent changes in design and style of product

Thus, process layout or functional layout is suitable for job order production involving non-repetitive processes and customer specifications and non standardized products, e.g. tailoring, light and heavy engineering products, made to order furniture industries, jewelry.

Fixed Position Layout In this type of layout, the major product being produced is fixed at one location. Equipment labour and components are moved to that location. All facilities are brought and arranged around one work centre.

Fixed Position Layout Advantages It saves time and cost involved on the movement of work from one workstation to another. Adjustments can be made to meet shortage of materials or absence of worker by changing the sequence of operations. Disadvantages: Fixed position layout has the following drawbacks Production period being very long, capital investment is very heavy Very large space is required for storage of material and equipment near the product. As several operations are often carried out simultaneously, there is possibility of confusion and conflicts among different workgroups.

Suitability: The fixed position layout is followed in following conditions Manufacture of bulky and heavy products such as locomotives, ships, boilers, generators, wagon building, aircraft manufacturing, etc. Construction of building, flyovers, dams.

Combined Layout A combination of process & product layout is known as combined layout E.g. In soap manufacturing plant, the machinery manufacturing soap is arranged on the product line principle; but ancillary services, such as heating, the manufacturing of glycerine, the power house, the water treatment plant are arranged on a functional basis.

Size of Business Unit Demand for the product : More demand means large size of organization. E.g. iron and steel industries. On the other hand, if demand for a product is less, they can only be sold in the local markets, the size of the business should be small. E.g. Handloom and crafts industries. Nature of the product :If the products are perishable in nature or the products for which the customer's choice and preference gets changed with the fashion, such products cannot keep pace in the markets for a long time. Therefore, they are not produced on large scale. E.g. food and drinks. On the other hand, the products which are non perishable, standardised, complex in nature and extensively large in size, requires large scale business. E.g. machinery and electronic gadgets. Availability of capital : Large scale business needs adequate funds. However, it is easy to raise fund for small scale businesses as it requires less capital for establishment.

Nature of industry : In case of capital intensive industries, large amount of fixed capital is required for establishment and growth. E.g. railway and transport industries. However, in case of labour intensive industries, there is no mechanisation and specialisation degrees. Hence the capital required is less. E.g. cottage industries. Availability of electricity : If the supply of electricity is adequate then large scale industries can develop and run successfully. On the other hand, small scale industries requires less power supply. Cost of transport : More the nearness to the raw material lesser will be the transportation cost. Also Nearness to the market for finished products reduces the transportation cost and lesser will be the size of business.On the other hand, it will be high.

Risk : Large scale businesses are financially sound and it can easily bear any kind of risk. On the other hand, liability is more and it becomes risky to setup small scale businesses. Market: If a product can capture both the national and world wide markets, the size of the business will increase. On the other hand, if the product is limited to the local markets, the size of the business will be small. Entrepreneurial ability and efficiency :If the entrepreneur lacks the ability and skill to utilise the opportunity. This may keep the size of the business small. On the other hand, entrepreneurs with the help of his skill and ability has expanded his business to a great extent.

Government regulation : Government has certain rules and policies relating to the size of the business e.g. obtaining licences and taxation policies. Small business undertakings can take the advantage of low taxes. However, before starting any business, entrepreneurs should obtain licence after confirming the standard size of the firm. Influence of environment : Geographical factors effects the size of the business of a particular country. Other factors : The willingness of the entrepreneurs to set up a business is one of the great factor affecting the size of the business. If a business requires skilled labours, it cannot grow up to a large size. If a business is setup to fulfill the requirements of the local people, it will always be in small size, like grocery, saloon, stationery, et

Forms of Business Organization Sole Proprietorship, Partnership, Joint Stock Companies & Co-operatives.

Sole Proprietorship When the ownership and management of business are in control of one individual, it is known as sole proprietorship or sole tradership. A business enterprise exclusively owned, managed and controlled by a single person with all authority, responsibility and risk.The grocery store, the vegetable store, the sweets shop, the chemist shop, the paanwala, the stationery store, the STD/ISD telephone booths etc. come under sole proprietorship.

Characteristics of Sole Proprietor Individual Ownership : The whole business is owned by single person. No Sharing of profit and Loss: The entire profit arising out of sole proprietorship business goes to the sole proprietor. Sole proprietor has to bear the entire risk or loss of the firm. No Separation between Ownership and Management : The owner of the enterprise is generally the manager of the business. He has got absolute right to plan,take decisions and execute them. One-mans Capital : The entire capital of the business is provided by the owner. In addition to his own capital he may raise more funds from outside through borrowings from close relatives or friends, and through loans from banks or other financial institutions.

Liability : In case the sole proprietor fails to pay for the business obligations and debts arising out of business activities and his personal property can be used to meet those liabilities. Stability : The stability and continuity of the firm depend upon the capacity, competence and the life span of the proprietor. Least Legal Formalities : In the setting up, functioning and dissolution of a sole proprietorship business no legal formalities are necessary. However, a few legal restrictions may be there in setting up a particular type of business. For example, to open a restaurant, the sole proprietor needs a license from the local municipality or authority.

Advantages of Soleproprietor Easy Formation: Anybody wishing to start such business can do so in many cases without any legal formalities. Better Control : The owner has full control over his business. He plans, organises, co-ordinates the various activities. Prompt Decision Making : Since all the decisions taken by the owner results into quick decision making, which enables the owner to take care of available opportunities immediately. Flexibility in Operations : Possible changes can be made in operations as and when necessary.

Personal Attention to Consumer Needs : The proprietor can take personal care of consumer needs as he normally functions within a small geographical area. Business Secrecy : Owner can maintain absolute secrecy regarding his business activities. Direct Motivation : The owner is directly motivated to put his best efforts as the owner alone gets the profit earned.

Disadvantages Unlimited Liability : In sole proprietorship, the liability of business is recovered from the personal assets of the owner. It restricts the sole trader to take more risk and increases the volume of his business. Limited Financial Resources : The ability to raise and borrow money by one individual is always limited. Lack of Specialization : An individual has limited knowledge and skill. He cannot be expert in all the areas required to run a successful business. Uncertainty of duration : The existence of a sole proprietorship business is linked with the life of the proprietor. Illness, death or insolvency of the owner brings an end to the business. The continuity of business operations, therefore, uncertain.

Partnership A partnership form of organisation is one where two or more persons are associated to run a business to earn profit. Persons from similar background or persons of different ability and skills, may join together to carry on a business. Each member of such a group is individually known as partnerand collectively the members are known as a partnership firm. These firms are governed by the Indian Partnership Act, 1932.

Characteristics 1. Number of Partners : A minimum of two persons are required to start a partnership business. 2. Contractual Relationship : The relation between the partners of a partnership firm is created by contract or an agreement which may be verbal or written and known as a Partnership Deed. 3. Competence of Partners : Only competent individuals can become the partners. Thus, minors and insolvent persons are not eligible to become partners. However, a minor can be admitted to the benefits of partnership i.e. he can have a share in the profits.

4. Sharing of Profit and Loss : The partners can share profit in any ratio as agreed. In the absence of an agreement, they share it equally. 5. Unlimited Liability : The partners have unlimited liability. They are liable jointly for the debts and obligations of the firm. Creditors can lay claim on the personal properties of any individual partner or all the partners jointly.

6. Principal-Agent Relationship : The business in a partnership firm may be carried on by all the partners or any one of them acting for all. A partner is an agent when he is acting on behalf of others and he is a principal when others act on his behalf. 7. Transfer of Interest : No partner can sell or transfer his interest in the firm to anyone without the consent of other partners. 8. Legal Status : A partnership firm is just a name for the business as a whole. Law does not recognise the firm as a separate entity distinct from the partners.

9. Voluntary Registration : Registration of partnership is not compulsory but registration gives many benefits in case of disputes, claims, disagreements, etc.

Types of Partnership Firms 1. General Partnership or Unlimited Partnership: In this case the liability of all the partners is unlimited.Every partner has the right to take part in the management of the business of the firm. (i) Partnership at Will Partnership-at-will is a partnership which is formed to carry on business without specifying any period of time. The life of such a partnership continues as long as the partners are willing to continue it as such. The partnership can be terminated, if any partner notifies his desire to quit. (ii) Particular partnership: When the partnership is formed for conducting business of specific or temporary nature or for a specific period. Firm comes to an end either on the completion of the or on the expiry of the time period for which the firm was constituted.

2. Limited Partnership: A partnership in which the liability of the partner is limited is called limited partnership. The Law does not permit the formation of a limited partnership in India. Under this type of partnership some of the partners have unlimited liability while others have limited liability up to their individual share in the capital of the firm. The partners having limited liability in the firm is known as special partner and others having unlimited liability is called general partner.

Types of Partners Active partners: The partners who actively participate in the day-to-day operations of the business are known as active partners. They contribute capital and are also entitled to share the profits and losses. Dormant partners: Those partners who do not participate in the day-to-day activities of the partnership firm are known as dormant or sleeping partners. They only contribute capital and share the profits or bear the losses, if any.

Nominal partners: These partners only allow the firm to use their name as a partner. They do not have any real interest in the business of the firm. They do not invest any capital, or share profits and also do not take part in the business of the firm. Minor as a partner: In special cases a minor can be admitted as partner with certain conditions. A minor can only share the profit of the business. In case of loss his liability is limited to the extent of his capital contribution for the business.

Advantages of Partnership a) Easy to Form: A partnership can be formed easily without many legal formalities. Since it is not compulsory to get the firm registered, a simple agreement, either in oral or writing is sufficient to create a partnership firm. (b) Availability of Larger Resources: It may be possible to pool more resources as compared to sole proprietorship. (c) Better Decisions: In partnership firm each partner has a right to take part in the management of the business. All major decisions are taken in consultation with and with the consent of all partners. (d) Flexibility: At any time the partners can decide to change the size or nature of business or area of its operation after taking the necessary consent of all the partners.

(e) Sharing of Risks: The losses of the firm are shared by all the partners equally or as per the agreed ratio. (f) Keen Interest: Since partners share the profit and bear the losses, they take keen interest in the affairs of the business. (g) Benefits of Specialisation: All partners actively participate in the business as per their specialisation and knowledge. (h) Protection of Interest: The rights of each partner and his/her interests are fully protected. If a partner is dissatisfied,he can ask for dissolution of the firm or can withdraw from the partnership. (i) Secrecy: Business secrets of the firm are only known to the partners. It is not required to disclose any information of the firm.

Disadvantages of Partnership (a) Unlimited Liability: The liability of the partners is unlimited i.e., the partners are personally liable for the debt and obligations of the firm. (b) Instability: Every partnership firm has uncertain life. The death, insolvency, incapacity or the retirement of any partner brings the firm to an end. (c) Limited Capital: Since the total number of partners cannot exceed 20, the capacity to raise funds remains limited as compared to a joint stock company where there is no limit on the number of share holders. (d) Non-transferability of share: The share of interest of any partner cannot be transferred to other partners or to the outsiders that creates inconvenience for the partner. (e) Possibility of Conflicts: Since every partner has an equal right to participate and place his or her opinion before the management regarding any matter at any time. Difference of opinion may give rise to quarrels and lead to dissolution of the firm.

Joint Stock Company A Joint Stock Company form is a voluntary association of persons to carry on business. Normally, it is given a legal status and is subject to certain legal regulations. A joint-stock company is a business entity which is owned by shareholders. Each shareholder owns the portion of the company in proportion to his or her ownership of the company's shares (certificates of ownership).

The money so contributed is the capital of the company. The persons who contribute capital are its members. The total capital of a joint stock company is called share capital and it is divided into a number of units called shares. Thus, every member has some shares in the business depending upon the amount of capital contributed by him. Therefore members of a joint stock company are known as shareholders and the capital of the company is known as share capital.

What is a Share? A share is a portion of the capital of a joint stock company which defines the extent of participation, liabilities and entitlement to the profit of its holder in such joint stock company.

Characteristics of Joint Stock Company 1. Association of persons: A private company must have at least two persons and the public limited company must have at least seven persons to get it registered. 2. Artificial person: A company is an artificial person. It is created by law. Like a natural person, it can own property, incur debts, enter into contracts. It can be sued and fined but cannot be imprisoned.

3. Separate legal entity: Joint Stock Company has a legal existence separate from its members, which means even if its members die, the company remains in existence. 4. Limited liability: Liability of a member is limited to the extent of the value of shares held by him. While repaying debts, for example, if a person owns 1000 shares of Rs.10 each, then he is liable only upto Rs 10,000 towards payment of debts.

5. Transferability of shares The shares of a public limited company are freely transferable and can be purchased and sold without the consent of other shareholders. 6. Common seal Since a company is an artificial person, it cannot put its signature on any document. Therefore, every company have a seal on which the name of the company is engraved. It is called a common seal as it can be used by any officer at any level of the organisation working on behalf of the company. 7. Separation of ownership from management The shareholders are the owners of the company. The shareholders elect their representatives called directors to manage the company. This results in separation of ownership from management.

8. Perpetual succession: The company existence is not affected by death or insolvency of its shareholders. The company can only be dissolved by the operation of law. 9. Investment facilities: A joint stock company raises its funds through issue of shares to general public.

Advantages of Joint Stock Company 1. Continuity:- The continuity and stability of the company is not affected by the death, insolvency and insanity of any of the partners. 2. Large Capital:- It is much easy to generate capital.The company can anytime subscribe its shares and raise its capital. 3. Limited Liability:- Shareholders are liable to the extent of their investments in the company.

4. Transferability of Shares:- The shareholders can any time sell their shares for cash in stock exchange. 5. Increase in Efficiency and Effectiveness of Management:- The company employs the experts in each department of the organization that helps in increasing the efficiency and effectiveness of management.

6. Large Membership:- In case of Private the maximum no. of member should not exceed 50 while in Public there is no restriction on the maximum number of members a company can have. 7. Greater Scope of Expansion:- It is much easy to raise capital in companies. There is direct relation between capital and scope of expansion.

BasisPrivate Limited Company Public Limited Company MembershipMinimum - 02 Maximum - 50 Minimum - 07 Maximum - no restriction IdentificationUse a suffix Private Limited after its name Use a suffix Limited after its Name Transferability of shares RestrictedFree Capital requiredNot less than Rs. 1 lakhNot less than Rs. 5 lakh Raising of fundsCan not give open invitation to the public to subscribe the shares Can raise as much money as required from public

Cooperative Society Term cooperation means working together. So those who want to work together with some common economic objectives can form a society, which is termed as cooperative society.

Objectives of Cooperative Society The important objectives of cooperative society form of business organisation are service in place of profit, Mutual help in place of competition, Self help in place of dependence, and moral solidarity in place of unethical business practices. Cooperative Societies having area of operation in more than one state are known as Multi-state Cooperative Societies.

Characteristics of Cooperative Society (a) Voluntary Association: Members join the cooperative society voluntarily i.e., by their own choice. (b) Open Membership: The membership is open to all those having a common economic interest irrespective of his/her caste, creed, religion, colour, sex etc. (c) Number of Members: A minimum of 10 members are required to form a cooperative society. In case of multi- state cooperative societies the minimum number should be 50 from each state. (d) Registration of the Society: In India, cooperative societies are registered under the Cooperative Societies Act 1912 or under the State Cooperative Societies Act. The Multi-state Cooperative Societies are registered under the Multi-state Cooperative Societies Act 2002.

State Control: Since registration of cooperative societies is compulsory, every cooperative society comes under the control and supervision of the government. Democratic Set Up: Every member has a right to take part in the management of the society on the basis of one-man one-vote irrespective of the number of shares held by any member.

Service Motive: The primary objective of all cooperative societies is to provide services to its members. Return on Capital Investment: The members get return on their capital investment in the form of dividend. Distribution of Surplus: After dividend,the surplus profit is distributed in the form of bonus, keeping aside a certain percentage as reserve and for general welfare of the society.

Advantages of Cooperatives Easy to Form: Any ten adult members can voluntarily form an association get it registered with the Registrar of Cooperative Societies. Limited Liability: The liability of the members of the cooperative societies is limited upto their capital contribution. Open Membership: Any competent like-minded person can join the cooperative society any time he likes. There is no restriction on the grounds of caste, creed, gender, colour etc. The time of entry and exit is also generally kept open. State Assistance: Cooperative societies always get assistance in the forms of loans, grants, subsidies etc. from the state as well as Central Government.

Stable Life: The cooperative society enjoys the benefit of perpetual succession. The death, resignation, insolvency of any member does not affect the existence of the society because of its separate legal entity. Tax Concession: To encourage people to form co-operative societies the government generally provides tax concessions and exemptions, which keep on changing from time to time. Democratic Management: The cooperative societies are managed by the Managing Committee, which is elected by the members. The members decide their own rules and regulations within the limits set by the law.

Disadvantages Limited Capital : The amount of capital that a cooperative can generate is limited because of the membership remaining confined to a locality or region. Problems in Management : Generally it is seen that co-operative do not function efficiently due to lack of managerial talent. Lack of Motivation : Co-operatives are formed to render service to its members than to earn profit. This does not provide enough motivation to manage the co-operatives effectively.

Lack of Secrecy : Maintenance of business secrecy is lacking in case of Cooperative society. Dependence on Government : The inadequacy of capital and various other limitations make co-operatives dependant on the government for support in terms of grants, loans etc.

Types of Cooperative Society (a) Consumers Cooperative Societies: These societies are formed to protect the interest of consumers by making available consumer goods of high quality at reasonable price. (b) Producers Cooperative Societies: These societies are formed to protect the interest of small producers by making available items of their need for production, like raw materials, tools and equipments etc. (c) Marketing Cooperative Societies: To solve the problem of marketing the products, small producers join hand to form marketing cooperative societies.

(d) Housing Cooperative Societies: To provide residential houses to the members, housing cooperative societies are formed generally in urban areas. (e) Farming Cooperative Societies: These societies are formed by the small farmers to get the benefit of large-scale farming. (f) Credit Cooperative Societies: These societies are started by persons who are in need of credit. They accept deposits from the members and grant them loans at reasonable rate of interest.

Small Scale Inddustries A small-scale industry is one in which the investment in plant & machinery is less than Rs. 1 crore. When investment is less than Rs. 25 Lakhs it qualifies to be treated as a Tiny sector SSI.

Small Scale Industries Registration of a small scale unit is also not compulsory. But its registration with the State Directorate or Commissioner of Industries makes the SSI eligible for availing different types of Government assistance like financial assistance, medium and long term loans from State Financial Corporations and other commercial banks, machinery on hire-purchase basis from the National Small Industries Corporation etc.

Supporting Organizations to SSI The Ministry of Micro, Small and Medium Enterprises Formulates and implements policies and programmes in order to promote small scale industries and Enhance their competitiveness. It is assisted by various public sector enterprises like:- 1. Small Industry Development Organisation (SIDO) is the apex body for assisting the Government in formulating and overseeing the implementation of its policies and programmes/projects/schemes. 2. National Small Industries Corporation Ltd (NSIC) was established by the Government with a view to promoting, aiding and fostering the growth of SSI in the country, with focus on commercial aspects of their operation.

The Ministry has established three National Entrepreneurship Development Institutes which are engaged in development of training modules, undertaking research and training and providing consultancy services for entrepreneurship development in the SSI sector. These are:- National Institute of Small Industry Extension Training (NISIET) at Hyderabad, National Institute of Entrepreneurship and Small Business Development (NIESBUD) at NOIDA Indian Institute of Entrepreneurship (IIE) at Guwahati

3. The National Commission for Enterprises in the Unorganised Sector (NCEUS) has been constituted with the mandate to examine the problems of enterprises in the unorganized sector and suggest measures to overcome them. 4. Small Industries Development Bank of India (SIDBI) acts as apex institution for financing SSIs through various credit schemes

Policies for SSI INDUSTRIAL POLICY RESOLUTION 1948 SSIs are particularly suited for the utilization of local resources and creation of employment opportunities. The primary responsibility for developing small industries by creating infrastructure has been provided to state government. Central government frame the broad policies and coordinates the efforts of State Government for development of SSIs.

INDUSTRIAL POLICY RESOLUTION 1956 It stated that besides continuing the policy support to cottage, village and small industries by differential taxation or direct- subsidies, the aim of state policy would be that the development of this sector is integrated with that of large scale industry

INDUSTRIAL POLICY RESOLUTION 1977 The main thrust of policy was effective promotion of cottage,village and small industries widely dispersed in rural area and small towns. This thinking specified the following things: 504 items were reserved for exclusive production in the small scale industries. The concept of District Industrial Centers (DICs) was introduced to that in each district a single agency could meet all the requirement of SSIs under one roof. Technological up gradation was emphasized in traditional sector.

INDUSTRIAL POLICY RESOLUTION 1990 Main feature of this resolution are as follows: 1. It raised the investment ceiling in plant and machinery for SSIs. It created central investment subsidy for this sector in rural and backward area. Also, assistance was granted to woman entrepreneurs for widening the entrepreneurial base Reservation of items to be produced by SSIs was increased to 836. Small Industries Development Bank of India was established to ensure adequate flow of credit to SSIs

INDUSTRIAL POLICY RESOLUTION 1991 The basic thrust of this resolution was to simplify regulations and procedures by delicensing, deregulation. Its salient feature are: SSIs were exempted from licensing for all articles of manufacture. The investment limit for tiny enterprises was raised to Rs.5 lacs irrespective of location. Equity participation by other industrial undertaking was permitted up to a limit of 24% of shareholding in SSIs.

COMPREHENSIVE POLICY PACKAGE FOR SSIS AND TINY SECTOR 2000 The exemption for excise duty limit raised from 50 lakhs to Rs One crore to improve the competitiveness. The third census of small scale industries by the ministry of SSI was conducted. which also covered sickness and its causes in SSIs. The limit of investment was increased in industry related service and business enterprises from Rs 5 lakhs to Rs 10 lakhs.

The scheme of granting Rs 75000 to each small scale enterprise for obtaining ISO 9000 certification was continued till the end of 10th plan. The limit of composite loan was increased from Rs. 10 lakhs to Rs 25 lakhs.

The coverage of ongoing Integrated Infrastructure Development (IID) was enhanced to cover all areas in the country with 50% reservation for rural areas and 50% earmarking of plots for tiny sector. The family income eligibility limit of Rs. 24000 was enhanced to Rs 40000 per annum under the Prime Minister Rozgar Yozna (PMRY)

INDUSTRIAL POLICY PACKAGE FOR SSI 2001-02 The investment limit was enhanced from Rs 1 crore to Rs 5 crore for units in hosiery and hand tool sub sectors. The corpus fund set up under the Credit Guarantee Fund Scheme was increased from 125 crore to 200 crore. Credit Guarantee cover was provided against an aggregate credit of Rs 23 crore till December 2001.

14 items were de-reserved in June 2001 related to leather goods, shoes and toys.

INDUSTRIAL POLICY ON SSIS 2003-04 73 items reserved for exclusive manufacture in the SSI sector were de-reserved in June 2003. These consist of chemical and their products, leather and leather products, laboratory reagents etc. Selective enhancement of investment in plant and machinery from Rs one crore to Rs 5 crore. It was for 13 items in stationary sector and 10 items of drugs and pharmaceuticals sector, from June 2003. Banks were directed to provide credit to SSI sector within an interest rate band of 2 percent above and below their Prime Lending Rates (PLR).

The composite loan limit for SSI was raised from Rs 25 lakhs to Rs 50 lakhs. The limit of dispensation of collateral requirement was raised from Rs 15 lakhs to Rs 25 lakhs on the basis of good track record and financial position of the unit.

POLICY INITIATIVES ON SSI 2004- 05 The lower limit of Rs 5 lakhs on loans covered under the Credit Guarantee Scheme was removed. All loans up to Rs 25 lakhs were made eligible for guarantee cover under the Credit Guarantee Scheme. 417 specialised bank branches were made operational for SSIs. 60 clusters were identified in July 2003 for focused development.

Small and Medium Enterprise (SME) fund of Rs 10000 crore was set up under SIDBI to solve the problem of inadequate finance for SSIs. Laghu Udyami Credit Card Scheme was liberalized. Under this scheme, the credit limit was increased to Rs 10 lakhs from Rs 2 lakhs.

POLICY PACKAGE FOR SME 2005-06 The Ministry of Small Scale Industries has identified 180 items for dereservation. The amount of the Credit Guarantee Fund was raised from Rs.1132 crore in March 2006 to Rs.2500 crore in five years. Credit Guarantee Trust for Small Industries (CGTSI) was advised to reduce the one time guarantee fee from 2.5 per cent to 1.5 per cent for all loans.

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