CHAPTER 1: FINANCIAL MANAGEMENT AND PROMOTION

1. TYPES OF CAPITAL?Answer:There are 2 types of capital. They are fixed capital and working capital:Working capital:Working capital(abbreviatedWC) is a financial metric which representsoperating liquidityavailable to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Gross working capital equals to current assets. Working capital is calculated ascurrent assetsminuscurrent liabilities.[1]If current assets are less than current liabilities, an entity has aworking capital deficiency, also called aworking capital deficit.A company can be endowed withassetsandprofitabilitybut short ofliquidityif its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturingshort-term debtand upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable, and cash.Calculation:Working capital is the difference between the current assets and the current liabilities. It is the amount invested by the promoters on the current assets of the organisation.The basic calculation of the working capital is done on the basis of the gross current assets of the firm.working capital = current assets - current liabilitiesInputsCurrent assets and current liabilities include three accounts which are of special importance. These accounts represent the areas of the business where managers have the most direct impact:accounts receivable(current asset)inventory(current assets), andaccounts payable(current liability)The current portion ofdebt(payable within 12 months) is critical, because it represents a short-term claim to current assets and is often secured by long term assets. Common types of short-term debt are bank loans and lines of credit.An increase in net working capital indicates that the business has either increasedcurrent assets(that it has increased its receivables, or other current assets) or has decreasedcurrent liabilitiesfor example has paid off some short-term creditors, or a combination of both.

Fixed capital:Fixed capitalis a concept ineconomicsandaccounting, first theoretically analyzed in some depth by the economistDavid Ricardo. It refers to any kind of real orphysical capital(fixed asset) that is not used up in the production of a product. It contrasts withcirculating capitalsuch as raw materials, operating expenses and the like.So fixed capital is that portion of the total capital outlay that is invested in fixed assets (such as land, buildings, vehicles, plant and equipment), that stay in the business almost permanently - or at the very least, for more than one accounting period. Fixed assets can bepurchasedby a business, in which case the business owns them. They can also beleased,hiredorrented, if that is cheaper or more convenient, or if owning the fixed asset is practically impossible (for legal or technical reasons).Refining the classical distinction between fixed and circulating capital inDas Kapital,Karl Marxemphasizes that the distinction is really purely relative, i.e. it refers only to the comparative rotation speeds (turnover time) of different types of physical capital assets. Fixed capital also "circulates", except that the circulation time is much longer, because a fixed asset may be held for 5, 10 or 20 years before it has yielded its value and is discarded for its salvage value. A fixed asset may also be resold and re-used, which often happens with vehicles and planes.Innational accounts,fixed capitalis conventionally defined as the stock of tangible, durable fixed assets owned or used by resident enterprises for more than one year. This includes plant, machinery, vehicles & equipment, installations & physical infrastructures, the value of land improvements, and buildings.TheEuropean system of national and regional accounts (ESA95)explicitly includes produced intangible assets (e.g. mineral exploitation, computer software, copyright protected entertainment, literary and artistics originals) within the definition of fixed assets.

2. FACTORS INFLUENCING TYPES OF CAPITAL?Answer:Main factors affecting the working capital are as follows:(1)Nature of Business:The requirement of working capital depends on the nature of business. The nature of business is usually of two types: Manufacturing Business and Trading Business. In the case of manufacturing business it takes a lot of time in converting raw material into finished goods. Therefore, capital remains invested for a long time in raw material, semi-finished goods and the stocking of the finished goods.Consequently, more working capital is required. On the contrary, in case of trading business the goods are sold immediately after purchasing or sometimes the sale is affected even before the purchase itself. Therefore, very little working capital is required. Moreover, in case of service businesses, the working capital is almost nil since there is nothing in stock.2)Scale of Operations:There is a direct link between the working capital and the scale of operations. In other words, more working capital is required in case of big organisations while less working capital is needed in case of small organisations.(3)Business Cycle:The need for the working capital is affected by various stages of the business cycle. During the boom period, the demand of a product increases and sales also increase. Therefore, more working capital is needed. On the contrary, during the period of depression, the demand declines and it affects both the production and sales of goods. Therefore, in such a situation less working capital is required.(4)Seasonal Factors:Some goods are demanded throughout the year while others have seasonal demand. Goods which have uniform demand the whole year their production and sale are continuous. Consequently, such enterprises need little working capital.On the other hand, some goods have seasonal demand but the same are produced almost the whole year so that their supply is available readily when demanded.Such enterprises have to maintain large stocks of raw material and finished products and so they need large amount of working capital for this purpose. Woolen mills are a good example of it.(5)Production Cycle:Production cycle means the time involved in converting raw material into finished product. The longer this period, the more will be the time for which the capital remains blocked in raw material and semi-manufactured products.Thus, more working capital will be needed. On the contrary, where period of production cycle is little, less working capital will be needed.(6)Credit Allowed:Those enterprises which sell goods on cash payment basis need little working capital but those who provide credit facilities to the customers need more working capital.(7)Credit Availed:If raw material and other inputs are easily available on credit, less working capital is needed. On the contrary, if these things are not available on credit then to make cash payment quickly large amount of working capital will be needed.(8)Operating Efficiency:Operating efficiency means efficiently completing the various business operations. Operating efficiency of every organisation happens to be different.Some such examples are: (i) converting raw material into finished goods at the earliest, (ii) selling the finished goods quickly, and (iii) quickly getting payments from the debtors. A company which has a better operating efficiency has to invest less in stock and the debtors.Therefore, it requires less working capital, while the case is different in respect of companies with less operating efficiency.(9)Availability of Raw Material:Availability of raw material also influences the amount of working capital. If the enterprise makes use of such raw material which is available easily throughout the year, then less working capital will be required, because there will be no need to stock it in large quantity.The requirement of fixed capital depends upon various factors which are explained below:1. Nature of Business:The type of business Co. is involved in is the first factor which helps in deciding the requirement of fixed capital. A manufacturing company needs more fixed capital as compared to a trading company, as trading company does not need plant, machinery, etc.2. Scale of Operation:The companies which are operating at large scale require more fixed capital as they need more machineries and other assets whereas small scale enterprises need less amount of fixed capital.3. Technique of Production:Companies using capital-intensive techniques require more fixed capital whereas companies using labour-intensive techniques require less capital because capital-intensive techniques make use of plant and machinery and company needs more fixed capital to buy plants and machinery.4. Technology Up-gradation:Industries in which technology up-gradation is fast need more amount of fixed capital as when new technology is invented old machines become obsolete and they need to buy new plants and machinery whereas companies where technological up-gradation is slow they require less fixed capital as they can manage with old machines.5. Growth Prospects:Companies which are expanding and have higher growth plan require more fixed capital as to expand they need to expand their production capacity and to expand production capacity companies need more plant and machinery so more fixed capital.6. Diversification:Companies which have plans to diversify their activities by including more range of products require more fixed capital as to produce more products they require more plants and machineries which means more fixed capital.

3. CAPITAL STRUCTUREAnswer:Infinance,capital structurerefers to the way acorporationfinances itsassetsthrough some combination ofequity,debt, orhybrid securities.A firm's capital structure is the composition or 'structure' of its liabilities. For example, a firm that has $20 billion in equity and $80 billion in debt is said to be 20% equity-financed and 80% debt-financed. The firm's ratio of debt to total financing, 80% in this example, is referred to as the firm'sleverage.In reality, capital structure may be highly complex and include dozens of sources of capital.Leverage (or gearing) ratios represent the proportion of the firm's capital that is obtained through debt (either bank loans or bonds).TheModigliani-Miller theorem, proposed byFranco ModiglianiandMerton Miller, forms the basis for modern thinking on capital structure, though it is generally viewed as a purely theoretical result since it disregards many important factors in the capital structure process factors like fluctuations and uncertain situations that may occur in the course of financing a firm. The theorem states that, in a perfect market, how a firm is financed is irrelevant to its value. This result provides the base with which to examine real world reasons why capital structureisrelevant, that is, a company's value is affected by the capital structure it employs. Some other reasons includebankruptcy costs,agency costs,taxes, andinformation asymmetry. This analysis can then be extended to look at whether there is in fact an optimal capital structure: the one which maximizes the value of the firm.

Capital Structure - What It Is and Why It MattersThe term capital structure refers to the percentage of capital (money) at work in a business by type. Broadly speaking, there are two forms of capital: equity capital and debt capital. Each has its own benefits and drawbacks and a substantial part of wise corporate stewardship and management is attempting to find the perfect capital structure in terms of risk / reward payoff for shareholders. This is true forFortune 500companies and forsmall businessowners trying to determine how much of their startup money should come from a bank loan without endangering the business.Let's look at each in detail:Equity Capital: This refers to money put up and owned by the shareholders (owners). Typically, equity capital consists of two types: 1.) contributed capital, which is the money that was originally invested in the business in exchange for shares of stock or ownership and 2.)retained earnings, which represents profits from past years that have been kept by the company and used to strengthen thebalance sheetor fund growth, acquisitions, or expansion.Many consider equity capital to be the most expensive type of capital a company can utilize because its "cost" is the return the firm must earn to attract investment. A speculative mining company that is looking for silver in a remote region of Africa may require a much higherreturn on equityto get investors to purchase the stock than a firm such as Procter & Gamble, which sells everything from toothpaste and shampoo to detergent and beauty products.Debt Capital: The debt capital in a company'scapital structurerefers to borrowed money that is at work in the business. The safest type is generally considered long-termbondsbecause the company has years, if not decades, to come up with the principal, while paying interest only in the meantime.Other types of debt capital can include short-termcommercial paperutilized by giants such as Wal-Mart and General Electric that amount to billions of dollars in 24-hour loans from thecapital marketsto meet day-to-day working capital requirements such aspayrolland utility bills. Other Forms of Capital: There are actually other forms of capital, such asvendor financingwhere a company can sell goods before they have to pay the bill to the vendor, that can drastically increasereturn on equitybut don't cost the company anything. This was one of the secrets toSam Walton's success at Wal-Mart. He was often able to sell Tide detergent before having to pay the bill to Procter & Gamble, in effect, using PG's money to grow his retailer. In the case of an insurance company, the policyholder "float" represents money that doesn't belong to the firm but that it gets to use and earn an investment on until it has to pay it out for accidents or medical bills, in the case of an auto insurer. Seeking the Optimal Capital StructureMany middle class individuals believe that the goal in life is to be debt-free (seeShould I Pay Off My Debt Or Invest?). When you reach the upper echelons of finance, however, that idea is almost anathema. Many of the most successful companies in the world base their capital structure on one simple consideration: the cost of capital. If you canborrow moneyat 7% for 30 years in a world of 3% inflation and reinvest it in core operations at 15%, you would be wise to consider at least 40% to 50% in debt capital in your overall capital structure.Of course, how much debt you take on comes down to how secure the revenues your business generates are - if you sell an indispensable product that people simply must have, the debt will be much lower risk than if you operate a theme park in a tourist town at the height of a boom market. Again, this is where managerial talent, experience, and wisdom comes into play. The great managers have a knack for consistently lowering theirweighted average cost of capitalby increasing productivity, seeking out higher return products, and more.

4. FACTORS DECIDING CAPITAL STRUCTURE?Answer:Capitalstructureof a firm is determined by various internal and external factors. Following are the main factors which affect the capitalstructuredecision.1. Size of A FirmThere is a positive relation between the capitalstructureand size of a firm. The large firms are more diversified, have easy access to the capital market, receive highercredit ratingsfor debt issues, and pay lower interestrateon debt capital. Further, larger firms are less prone to bankruptcy and this implies the less probability of bankruptcy and lower bankruptcy costs. Therefore, larger firms tend to use more debt capital than smaller firms.2. Growth in SalesAnticipated growthratein sales provides a measure of extent to which earning per share (EPS) of a firm are likely to be magnified by leverage. The firm is likely to use debt financing with limited fixed charge only when the return on equity is likely to be magnified. However, the firms with significant growth in sales would have high marketpriceper share as a result of which they might prefer equity financing. The firm should make a relative cost benefit analysis against debt and equity financing in anticipation to growth in sales to determine appropriate capitalstructure.3. Business RiskThere is negative relation between the capitalstructureand business risk. The chance of business failure is greater if the firm has less stable earnings. Similarly, as the probability of bankruptcy increases the agency problems related to debt become more aggravating. Thus, as business risk increases, the debt level in capitalstructureof the enterprises should decrease.4. Debt Service CapacityThe higher debt level in capitalstructureincreases the probability of bankruptcy and bankruptcy costs of the enterprises. Probability of bankruptcy refers to the chances of cash flows to be less than theamountrequired for servicing the debt. The debt service ratio measured by the ratio of operatingincometo total interest charges indicates the firm's ability to meet its interest payment out of itsannualoperating earnings. Therefore, the higher debt service ratio shows the higher debt capacity of the enterprises. Hence, there is the positive relation between the debt service capacity and capitalstructureof the firm.5. Operating LeverageThe use of fixed cost in productionprocessalso affects the capitalstructure. The high operating leverage; use of higher proportion of fixed cost in the total cost over a period of time; can magnify the variability in future earnings. There is negative relation between operating leverage and debt level in capitalstructure. Higher the operating leverage, the greater the chance of business failure and the greater will be theweightof bankruptcy costs on enterprise financing decisions.6.Stability In Cash FlowThe firm's cash flow stability also affects its capitalstructure. If firm's cash flows are relatively stable, then it may find no difficulties in meeting its fixed charge obligation. As a result, the firm may attempt to take the benefits by using leverage to some extent.7. Nature Of IndustryCapitalstructureof a firm also depends on the nature of industry in which it operates. If there were no barriers in industry for the entry of new competing firms, the profit margin of existing firms in the industry would be adversely affected. As a result, the firm may find a more risky to use fixed charge bearing securities.8. AssetStructureThe sources of financing to be used are affected to several ways by the maturity structure of assets to be used by the firm. If a firm has relatively longer term assets with assured demand of their products, the firm attempts to use more long term debt. In contrast to this, the firms with relatively greater investment in receivables and inventory rather than fixed assets rely heavily on short-term financing.5. SOURCES OF CAPITAL?Answer: Answer: The sources of fixed capital are :(i) Equity Shares:Equity shareholders are the owners of the company and their contribution constitute the main source of finance. The promoters are the first to contribute towards share capital of the company and the remaining amount of funds are raised through sale of shares to general public. Equity shareholders are the risk bearers of the company and are going to absorb all stress and strains of the business.Financial structure of the company is strengthened by equity capital. Equity shareholders have limited liability and they enjoy voting rights. They can increase their stake in the firm or can keep full control over the company through issue of right and bonus shares. Equity capital is permanent capital of the firm and there is no liability for repayment and even dividend payment to the equity shareholders is not obligatory.(ii) Preference Shares:These shareholders enjoy preferencew.r.t.dividend and return of capital. Those investors who opt for limited but steady return on their investment prefer preference shares. Preference share capital possesses certain features of both equity and debt capital. Preference shareholders receive dividend like equity shareholders. Similarly it is like debt capital since the rate of dividend is predetermined.Preference shares are not a permanent liability on the firm as dividend is payable only when there are profits. A company can introduce flexibility in its capital structure by issuing redeemable preference shares which can be redeemed when the company has sufficient profits. These are not very popular in India and can be made more popular by issuing cumulative convertible preference shares.(iii)Debentures:Debenture provides the firm with another option of raising term loans from the public. Debentures are normally secured and yield a fixed percentage of interest. Thus they are less risky and give regular return to debenture holders. With the issue of debentures shareholders can retain control and earn more return on their investment.Debenture capital add more financial burden on the firm during hard times and increase risk of insolvency of the firm. Many companies in India in recent years have issued convertible or partly convertible debentures with the discretion to convert them into equity shares of the company.(iv)Term Loans:These are the loans obtained from banks and financial institutions and constitute the most important source of finance. Term loans are normally repayable within a period of ten years or more and carry a fixed rate of interest.Lending institutes insist on margin money from promoters and are ready to defer repayment till gestation period is over. Term loans are raised for meeting fixed and working capital needs. Term loans provide - the advantage of trading on equity and at the same time allow owners to have control over the business.(v) Retained Earnings:Retained earnings reer to the surplus or reserve accumulated over years. This amount can be re-invested in the enterprise for upgradation and expansion. The cost of employment of this capital is practically nil and at the same time no liability worth the name is created.(vi)Capital Subsidy:In order to tempt entrepreneurs towards backward areas the Central Government provides capital subsidy. Similarly certain state governments too grant development loans to entrepreneurs for setting up industries in exclusively notified areas in their states.

Long-Term LoansA loan is the amount of money that is given to an individual or a company on the agreement they will repay the amount borrowed in a period that exceeds 12 months and at predetermined interest rates. Long-term loans are usually secured against certain assets and are offered by commercial banks, the government and financial institutions. This type of loan provides the long-term working capital for the business.Short-Term LoansShort-term loans are loans that are to be repaid within a year from the time they are borrowed. Savings banks, cooperatives and the government through the Small Business Administration are some of the institutions that offer these loans. Bank overdraft is one such source of business finance. A bank overdraft is a withdrawal made by a business that exceeds the amount of balance in its bank account, although the amount of money does not exceed a set limit.Line of CreditThis is a form of a loan agreement between the bank and the borrower that enables the borrower to acquire some amount of the funds on demand, but the borrower does not have to take the loan. A business may secure working capital through this service if it has recurring expenses at regular intervals.Trade CreditThis credit service offered by suppliers allows businesses to get goods and pay for them later. This is a source of working capital that may be acquired from all suppliers depending on the business arrangements, the type of business you conduct and the worth of the credit to be offered.Asset-Based FinancingA business may use its assets to secure working capital from financial institutions that offer asset based loans. The asset includes machinery, vehicle or accounts receivable. Accounts receivable are financial documents of people or companies that owe money to the business and they may be traded in to finance working capital at discounting companies.6. BUSINESS FINANCE?Answer:Business finance is also referred as corporate finance or financial management. Generally the term corporate finance is connected with financial management of companies. However, it is applied to all activities where finance is required such as agriculture, industry and services.Financial management is concerned with raising of funds and utilization of funds. The main aim of financial management is to attain maximum return on investment.Objectives of financial management:The financial management is generally concerned with procurement, allocation and control of financial resources of a concern. The objectives can be-a. To ensure regular and adequate supply of funds to the concern.b. To ensure adequate returns to the shareholders which will depend upon the earning capacity, market price of the share, expectations of the shareholders.c. To ensure optimum funds utilization. Once the funds are procured, they should be utilized in maximum possible way at least cost.d. To ensure safety on investment, i.e, funds should be invested in safe ventures so that adequate rate of return can be achieved.e. To plan a sound capital structure-There should be sound and fair composition of capital so that a balance is maintained between debt and equity capital.

7. ENTREPRENEURSHIP DEVELOPMENT PROGRAM?Answer:As the term itself denotes, EDP is a programme meant to develop entrepreneurial abilities among the people. In other words, it refers to inculcation, development, and polishing of entrepreneurial skills into a person needed to establish and successfully run his / her enterprise. Thus, the concept of entrepreneurship development programme involves equipping a person with the required skills and knowledge needed for starting and running the enterprise.The main purpose of such entrepreneurship development programme is to widen the base of entrepreneurship by development achievement motivation and entrepreneurial skills among the less privileged sections of the society.According to N. P. Singh (1985), Entrepreneurship Development Programme is designed to help an individual in strengthening his entrepreneurial motive and in acquiring skills and capabilities necessary for playing his entrepreneurial role effectively. It is necessary to promote this understanding of motives and their impact on entrepreneurial values and behaviour for this purpose. Now, we can easily define EDP as a planned effort to identify, inculcate, develop, and polish the capabilities and skills as the prerequisites of a person to become and behave as an entrepreneur.Objectives of EDP:The major objectives of the Entrepreneurship Development Programmes (EDPs) are to:a. Develop and strengthen the entrepreneurial quality, i.e. motivation or need for achievement.b. Analyse environmental set up relating to small industry and small business.c. Select the product.d. Formulate proposal for the product.e. Understand the process and procedure involved in setting up a small enterprise.f. Know the sources of help and support available for starting a small scale industry.g. Acquire the necessary managerial skills required to run a small-scale industry.h. Know the pros and cons in becoming an entrepreneur.i. Appreciate the needed entrepreneurial discipline.j. Besides, some of the other important objectives of the EDPs are to:k. Let the entrepreneur himself / herself set or reset objectives for his / her enterprise and strive for their realization.l. Prepare him / her to accept the uncertainty in running a business.m. Enable him / her to take decisions.n. Enable to communicate clearly and effectively.8. VARIOUS ORGANIZATIONS PROVIDING ENTREPRENEURSHIP DEVELOPMENT PROGRAMME?Answer:The government has setup various centers or institutes to impart training and development to entrepreneurs so as to improve their knowledge, attitudes, and skills. Some of the various institutes are briefly explained as follows:a. National institute for entrepreneurship and small business development:NIESBUD is an apex body under the Ministry of Micro, Small & Medium Enterprises, Government of India for coordinating and overseeing the activities of various institutions/agencies engaged in entrepreneurship development particularly in the area of small industry and small business. The Institute which is registered as a Society under Societies Registration Act, 1860 (XXI of 1860), started functioning from 6thJuly, 1983.The policy, direction and guidance to the Institute is provided by its Governing Council whose Chairman is the Minister of MSME.The Executive Committee consisting of Secretary (Micro, Small & Medium Enterprises) as its Chairman and Director General of the Institute as its Member-Secretary, executes the policies and decisions of the Governing Council through its whole-time Director General.b. Small industries development organisations(SIDO):The Small Industries Development Organization (SIDO) is the national SME Development Agency of India. It is a major constituent of the Ministry of Small Scale Industries of the Government of India. A senior official of the Government of India, who is designated as the Development Commissioner for Small Scale Industries (DCSSI), heads SIDO. He is also the ex-officio Additional Secretary in the Ministry of Small Scale Industries; that is, he is second in command in the bureaucratic hierarchy of the Ministry. Set up in 1954, SIDO provides services to small industry throughout the country by implementing a broad program of activities and services including the following: Entrepreneurship Development Tool Room Services Testing Centres Extension Services R&D Services Consultancy Services Policy DevelopmentThe strength of SIDO lies in its countrywide spread of almost 100 offices/service centres, which employ over 2500 staff, mostly technical. SIDO partners and networks with other national providers of support and financial services to SMEs such as the Small Industries Development Bank of India (SIDBI), the National Small Industries Corporation (NSIC), the Bureau of Indian Standards (BIS), the Reserve Bank of India (RBI) (India's Central Bank) and relevant agencies of the Governments of the 28 States of the country. The Government of India essentially funds SIDO but, of late, some its activities (such as Tool Rooms, Testing Centres and Consultancy Services) are becoming increasingly self-sustaining.c. Entrepreneurship development institute of india(EDII):EDI, an autonomous institution set up in 1983 as a pioneering institute for Entrepreneurship Development and Training in India and around the globe.

The driving values at the Institute are innovation, experimentation, risk-taking, inclusiveness, thinking out of the box and to offer need based & socially relevant solutions.

EDI conducts several training programmes both national and international, implements projects for the state governments, central government and international organisations, and offers two unique Post Graduate Programmes under its Centre for Entrepreneurship Education & Research.d. National small industries corporation(NSIC):National Small Industries Corporation Limited(NSIC) is a PSU established by theGovernment of Indiain 1955it falls under Ministry of Micro, Small & Medium Enterprises of India.It was established in 1955 to promote and develop micro and smalls scale industries and enterprises in the country.It was originally founded as a Government of India agency later made into a fully owned government corporation.Government of India in order to promote small and budding entrepreneurs of post independent India, decided to establish a government agency which can mediate and provide help to small scale industries (SSI). As such they establishedNational Small Industries Corporationwith objectives to provide machinery on hire purchase basis and assisting and marketing in exports. District industries centres(DICs):DICs are the Nodal Offices towards development of Industries. All intending entrepreneours are welcome. DICs also depute Industrial Development Officers at the Block Office.

Since the introduction in 1978, District Industries Centres are engaged for promotion of SSI to achieve the goal of providing more employment and rendering economic development. Identification and careful selection of potential entrepreneurs with the appropriate traits and attributes are a major part of training and motivation activities of DICs. Regular sitting with entrepreneurs and Block/ Gram Panchayat wise group discussion to make them aware and motivate the local people and artisans are taken up.

In each District Industries Centre, there are groups of Managers in the rank of Asst. Director of Industries and also a number of Industrial Development officers to assist the General Manager who is the organisatioal Head of the District. Moreover in each block of the state and in some boroughs of Kolkata and Howrah Municipal Corporation one Industrial Development Officer is posted under the control of Block Development Officer or G.M., DIC, Kolkata and Howrah in case of Borough , respectively.

e. National institute of small industry extension training(NISIET):ni-msmewas originally set up as Central Industrial Extension Training Institute (CIETI) in New Delhi in 1960 as a Department under the Ministry of Industry and Commerce, Government of India. It was decided to keep it free from the tardy and impeding administrative controls and procedures, so that the Institute can play a pivotal role in the promotion of small enterprise. Therefore the Institute was shifted to Hyderabad in 1962, and was renamed as Small Industry Extension Training (SIET) Institute.SIET, as it was fondly known for over two decades later, is managed by Governing Council, appointed by the Government of India. The Founder-Chairman of SIET is Dr P.C. Alexander, the then Development Commissioner (Small Scale Industries).SIET was conferred the status of national institute by the Government of India with the charter of assisting in the promotion of Small Enterprises mainly by creating a pro-business environment.

CHAPTER 2: CHALLENGES AND RECENT TRENDS

1. VARIOUS CHALLENGES FACED BY ENTREPRENEURS IN INDIA?Answer:

The Indian entrepreneurs have to face following challenges:1. To understand, tackle and survive the era of globalization.2. To take optimum advantage of business opportunities arose due to liberalization of Indian economy since 1991.3. To replace outdated technology with improved modern technology.4. To motivate and properly manage needs and expectations of women and young managers that make an Indian workforce.5. To follow marketing techniques that are result and consumer-oriented.6. To professionally manage the financial activities of the business.7. To improve production process and produce high-quality goods.8. To balance profit earning capacity and social-welfare activities.Discussed below are the challenges before Indian entrepreneurs.

1. Challenge of globalizationA few years back the Indian entrepreneurs had to fight regional and national competition. However, today, the scenario has changed and become much more complex than what it was earlier. Now, almost all countries have opened up their economies, and the world (globe) has become one giant global market.To survive this competitive era of globalization, Indian entrepreneurs must prepare themselves with new, better, and innovativebusinesstactics and skills. They must accept this global challenge willingly and try their best to seek business opportunities to establish their dominant place in this ever-changing and always challenging open market.

2. Liberalization in India, 1991

Liberalization is a process of giving liberty or freedom to someone to do something, which was previously restricted, banned or prohibited. In context of this article, liberalization means removing all restrictions imposed on the entry and growth in trade or business.The Government of India (GOI) started the process of liberalization in India in year1991. With its initiation, private entrepreneurs were granted liberty (freedom) to start any business in any open domain (unreserved sector) of choice. However, this openness came with few exceptions that were strictly restricted only for Indian government to operate and manage, this included Railways, Water Supply, Defence, and other reserved public sectors

3. Adapting a modern technologyWith each passing day, Science and Technology are developing rapidly. Modern technology not only improves quality of produced goods and services, but it also helps to reduce their cost of production. It speeds up their process of production. High-quality commodities, lower cost of production, and faster production rate makes any company a highly competitive one. Therefore, it becomes mandatory for every company to keep pace with new emerging technologies and adapt it regularly to remain as cutthroat as possible.

4. Changing workforce in IndiaIn the recent decade, the workforce in India has undergone a remarkable change. Statistics indicate the dominance of men in the workforce is shrinking day-by-day. A new breed (generation) of highly educated Indian women has entered the workforce in India. Breaking all traditional and social barriers, they have established themselves as efficient employees and professional managers. Today, it is very common to see a lady professional working in a corporate office. This presence of women in the workforce has brought new challenges before Indian entrepreneurs.5. Marketing is a big challengeToday, companies have formulated many new techniques to market their products and services. High pressure salesmanship is used. Children are often targeted in the many advertisements. It is so since kids compel their parents to buy products they are lured by. Advertising is done to propagate marketing message and this is done through various media like television, newspapers, magazines, the internet, radio, cell phones, hoardings, etc. Advertising is now become an inseparable part of modern marketing.

6. Managing the finance of businessFinanceis the life blood of a business. It can either make a business or break it. Under-capitalization and Over-capitalization are very harmful to the business. Managing the finance of his business is a big challenge for an Indian Entrepreneur. He must manage both Fixed and Working capital properly. He must borrow money from the right source. He must manage his Cash Flow properly.7. Challenges in the field of productionThe Indian entrepreneurs have to face many challenges in the field of production. They must replace all outdated plants and machineries with new modern ones. They must provide continuous training to their production staff. They must use good quality raw-materials to produce high quality finished goods. They must have a good Inventory Control system. This will avoid Over-stocking and Under-stocking. Over-stocking will block the working capital, and Under-stocking will block the production process. Indian entrepreneurs should use a part of their profits for Research and Development (R & D). They must pay special attention to Quality Control (QC). Now-a-days most companies also use Total Quality Management (TQM) to ensure their finished goods are of good quality.

8. Balancing economic and social ObjectivesThis is also a big challenge before Indian entrepreneurs. They must balance between earning high profit and doing social-welfare activities. They must use modern machines without causing unemployment and harm to the environment. They must earn a profit without reducing quality of their goods and services. They must earn a profit without charging high prices for their products.

2. PROBLEM OF WOMEN ENTREPRENEURS?Answer:Women entrepreneurs face a series of problems right from the beginning till the the enterprise functions. Being a woman itself poses various problems to a woman entrepreneur, The problems of Indian women pertains to her responsibility towards family, society and lion work.The tradition, customs, socio cultural values, ethics, motherhood subordinates to ling husband and men, physically weak, hard work areas, feeling of insecurity, cannot be tough etc are some peculiar problems that the Indian women are coming across while they jump into entrepreneurship.Besides the above basic problems the other problems faced by women entrepreneurs are as follows:1. Family ties:Women in India are very emotionally attached to their families. They are supposed to attend to all the domestic work, to look after the children and other members of the family. They are over burden with family responsibilities like extra attention to husband, children and in laws which take away a lots of their time and energy. In such situation, it will be very difficult to concentrate and run the enterprise successfully.2. Male dominated society:Even though our constitution speaks of equality between sexes, male chauvinism is still the order of the day. Women are not treated equal to men. Their entry to business requires the approval of the head of the family. Entrepreneurship has traditionally been seen as a male preserve. All these puts a break in the growth of women entrepreneurs.3. Lack of education:Women in India are lagging far behind in the field of education. Most of the women (around sixty per cent of total women) are illiterate. Those who are educated are provided either less or inadequate education than their male counterpart partly due to early marriage, partly due to son's higher education and partly due to poverty. Due to lack of proper education, women entrepreneurs remain in dark about the development of new technology, new methods of production, marketing and other governmental support which will encourage them to flourish.4. Social barriers:The traditions and customs prevailed in Indian societies towards women sometimes stand as an obstacle before them to grow and prosper. Castes and religions dominate with one another and hinders women entrepreneurs too. In rural areas, they face more social barriers. They are always seen with suspicious eyes.5. Shortage of raw materials:The scarcity of raw materials, sometimes nor, availability of proper and adequate raw materials sounds the death-knell of the enterprises run by women entrepreneurs. Women entrepreneurs really face a tough task in getting the required raw material and other necessary inputs for the enterprises when the prices are very high.6. Problem of finance:Women entrepreneurs stiffer a lot in raising and meeting the financial needs of the business. Bankers, creditors and financial institutes are not coming forward to provide financial assistance to women borrowers on the ground of their less credit worthiness and more chances of business failure. They also face financial problem due to blockage of funds in raw materials, work-in-progress finished goods and non-receipt of payment from customers in time.7. Tough competition:Usually women entrepreneurs employ low technology in the process of production. In a market where the competition is too high, they have to fight hard to survive in the market against the organised sector and their male counterpart who have vast experience and capacity to adopt advanced technology in managing enterprises8. High cost of production:Several factors including inefficient management contribute to the high cost of production which stands as a stumbling block before women entrepreneurs. Women entrepreneurs face technology obsolescence due to non-adoption or slow adoption to changing technology which is a major factor of high cost of production.9.Low risk-bearing capacity:Women in India are by nature weak, shy and mild. They cannot bear the amount risk which is essential for running an enterprise. Lack of education, training and financial support from outsides also reduce their ability to bear the risk involved in an enterprises.3. INTELLECTUAL PROPERTY?Answer:Intellectual property(IP) is a legal term that refers to creations of the mind. Examples of intellectual property include music, literature, and other artistic works; discoveries and inventions; and words, phrases, symbols, and designs. Under intellectual property laws, owners of intellectual property are granted certain exclusive rights. Some common types of intellectual property rights (IPR) arecopyright,patents, andindustrial design rights; and the rights that protect trademarks,trade dress, and in some jurisdictionstrade secrets. PatentsApatentgrants an inventor the right to exclude others from making, using, selling, offering to sell, and importing aninventionfor a limited period of time, in exchange for the public disclosure of the invention. An invention is a solution to a specific technological problem, which may be a product or a process. CopyrightAcopyrightgives the creator of an original workexclusive rightsto it, usually for a limited time. Copyright may apply to a wide range of creative, intellectual, or artistic forms, or "works".Copyright does not cover ideas and information themselves, only the form or manner in which they are expressed. Industrial design rightsAnindustrial design rightprotects the visual design of objects that are not purely utilitarian. An industrial design consists of the creation of a shape, configuration or composition of pattern or color, or combination of pattern and color in three-dimensional form containing aesthetic value.TrademarksAtrademarkis a recognizablesign,designorexpressionwhich distinguishes products or services of a particular trader from the similar products or services of other traders. Trade dressTrade dressis a legal term of art that generally refers to characteristics of the visual appearance of a product or its packaging (or even the design of a building) that signify the source of the product to consumers. Trade secretsAtrade secretis aformula,practice,process,design,instrument,pattern, or compilation ofinformationwhich is not generally known or reasonably ascertainable, by which abusinesscan obtain an economic advantage over competitors or customers. In the United States, trade secret law is primarily handled at the state level under theUniform Trade Secrets Act, which most states have adopted, and a federal law, theEconomic Espionage Act of 1996(18 U.S.C.18311839), which makes the theft or misappropriation of a trade secret a federal crime. This law contains two provisions criminalizing two sorts of activity.

4. OPPORTUNITIES FOR RURAL ENTREPRENEURS?Answer?Rural entrepreneurs have a number of opportunities in several areas. Some of the opportunities are as follows:a. Manufactured items: Some of the product categories are well established in rural areas which include: Means of transportation- bicycles, scooters, and motor cycles. Entertainment goods such as radios and TV sets. Agriculture related goods such as agricultural machinery, fertilizers, pesticides, etc. Beverages such as packed tea etc.b. Tourism sector:Some of the rural areas provide a rich source of tourist attraction, especially waterfalls, wildlife and so on. Therefore there is a good scope for entrepreneurs in rural areas in respect of restaurants, transport operations and so on.c. Raw materials industry:Rural areas provide a good source of raw materials such as mineral ores, limestone and so on. Therefore rural entrepreneurs can setup industries, such as mining, drilling etc. they can also provide services such as transportation for transporting the raw materials from the sites to the places of manufacturing.d. Food processing industry:Rural areas produce a number of food crops. Villagers also collect forest produce such as honey. Therefore, rural entrepreneurs can setup food processing industries such as making jam, honey , tomato ketchup, fruit juices etc.e. Herbal products:Rural areas provide a rich source of herbs. With the help of herbal research, rural entrepreneurs can produce a number of health related herbal products. Now a days ayurvedic and homeopathic medicines have become popular not only in india but also in western countries.f. Micro units:Small entrepreneurs can setup small units such as carpentry works, small engineering works, etc. central and state government provides a lot of incentives and support to setup self-employment projects in rural areas. g. Rural development projects:The government takes various rural development activities such as construction of roads, housing, water supply, irrigation projects, rural electrification etc. the rural entrepreneurs can take sub contracts from the government to undertake rural development activities.h. Dairy business:Rural entrepreneurs have a good scope in dairy business. India is the largest producer of milk in the world. Dairy products such as packed milk, ice-creams and other milk based products have a good demand in the urban markets.5. FUTURE OF ENTREPRENEURSHIP IN INDIA?Answer:In India, business was traditionally considered to be the domain of scholarly challenged individuals or the result of natural inheritance within business communities. Gradually, the appetite for risk and the acceptance of failure increased, but only recently have alternate professions and the idea of "following ones dream" gained approval. In particular, entrepreneurship caught the fancy of the Indian middle class after the economy was liberalized. The economic reforms introduced in 1991 reduced the bureaucratic controls, promoted private enterprise, and lowered the barriers to creating new businesses. Coupled with the emergence of knowledge economy, the demand for skilled employees greatly increased and a trend emerged toward technology entrepreneurship in the services sector, which is less capital-intensive than traditional industries.Indeed, the future of entrepreneurship in India lies in the services sector, and the Government of India is providing support to encourage this trend. However, there are as many challenges as there are opportunities, as will be discussed below.Traditionally, government programs, and support from the banking and finance industry, were largely focused and aligned to the manufacturing sector with its strong product focus. Industry associations such as the Confederation of Indian Industry (CII), the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Associated Chambers of Commerce and Industry of India (ASSOCHAM) have existed since the pre-independence era and lobby the government for policy initiatives that favour traditional businesses and industries. With the information technology sector emerging as a rapidly growing segment of Indian industry the National Association of Software and Services Companies (NASSCOM) was formed in 1988 as the industry association for information technology industry.In 2000, the National Science & Technology Entrepreneurship Development Board (NSTEDB) under the aegis of the Department of Science and Technology (DST) launched the Technology Business Incubation (TBI) program, which is geared towards supporting entrepreneurship in emerging technology areas such as information and communications technology, manufacturing, biotechnology, nanotechnology, and agricultural technology. This program was an extension of the Science & Technology Entrepreneurs' Park program, which was initiated in 1985 by the NSTEDB in academic institutions and research labs of excellence with an objective of promoting self-employment for young science and technology graduates. The NSTEDB identified 120 technology business incubators in different technology areas within India (NSTEDB, 2009). Of these, 53 were promoted by the NSTEDB, 40 were software technology parks promoted by the Ministry of Information and Communication Technology, and the remaining 30 were promoted by other government departments, banks, financial institutions, or private companies.

Recently, India is considered to be amongst the three top investment destinations. According to a report released by Evalueserve research, over 44 U.S. based VC firms are now seeking to invest heavily in startups and early-stage companies in India. Reports from PricwwaterhouseCoppers predict that between 2010 and 2024, 2219 multinational companies will emerge from India.In conclusion, with a consistently growing local market for indigenous products, supported by a reasonably efficient and transparent legal system, I believe India could potentially emerge as one of the top 3 world economies in the world by 2020. This articles concludes with these lines from The Mystery of Capital by Hernando de Soto.People in developing countries are not pitiful beggars, are not helplessly trapped in obsolete ways and are not uncritical prisoners of dysfunctional cultures. In fact, he says and I can vouch from my experience that the developing world is teeming with entrepreneurs who possess an astonishing ability to wring a profit out of practically nothing.

CHAPTER 3: MANAGING A NEW ENTERPRISEINTRODUCTION It is needless to mention that water, a compound of Hydrogen and Oxygen is a precious natural gift which is very essential for survival of mankind including animals. The water used for potable purposes should be free from undesirable impurities. The water available from untreated sources such as Well, Boreholes and spring is generally not hygienic and safe for drinking. Thus it is desirable and necessary to purify the water and supply under hygienic conditions for human drinking purpose. As the name implies, the mineral water is the purified water fortified with requisite amounts of minerals such as Barium, Iron, Manganese, etc which can be absorbed by human body. It is either obtained from natural resources like spring and drilled wells or it is fortified artificially by blending and treating with mineral salts. The mineral water shall be manufactured and packed under hygienic conditions in properly washed and cleaned bottles in sterilized conditions.To take advantage of this expanding market for drinking water, KENT BLUE AQUA Bottled Water has been established under the company named BHAIRAVNATH FOODS AND MINERALS PVT. LTD. to provide home and office delivery of bottled water and 20 liter water jars facility in the local areas of Rajasthan. After months of extensive industry and market research, the company has developed a business plan to enter the market for bottled water. The plant is located in Rajasthan on the land area of 3000 sq.ft. The business will be carried out through 50% partnership mode.

MARKET DEMAND Unfortunately sufficient safe potable water is not available everywhere in the country; either harmful chemical substance is found in the layers of the earth which enter into water or it may be contaminated due to pathogenic micro-organisms. If such water is consumed, the body suffers from water borne diseases. Due to this, it has become imperative to process and bottle safe potable water for the mankind in prevailing conditions. The demand for purified water becomes more during summer season. Although few companies have already entered in the bottling of safe potable water and mineralized water, but still huge gap is there in between demand and supply at all metropolitan-cities and towns. The product is widely accepted in offices, restaurants, railway stations, airport, bus stands, and hospitals and to some extent even in rich house-holds. So there is good scope for establishing the units for processing and bottling plain and mineralized drinking water in different parts of the country.PRODUCT:The name of the packed mineral water will be Kent blue aqua.The company is mainly oriented to manufacture 1 liter and 250 ml bottles and 20 liters water jars, packed drinking water pouches of 100 ml.KENT BLUE AQUA offers home and office delivery of drinking waters, as well as water cooler rentals, under Bhairavnath foods and minerals private limited label. The basic attribute of the product are as follows:Bottle priced at rs. 10Level of quality is exceptional.Product is basically targeted to the common people who are not getting good water resulting into various diseases.OPERATING PLANSpring, distilled, and purified drinking waters are bottled by Bhairavnath foods and minerals pvt. Ltd. Rajasthan, who will supply packed drinking water and water jars labeled with Kent blue aqua logo. Plastic is preferred as the bottle packaging because it is lightweight, unbreakable, and inexpensive to produce and ship.LocationThe company will operate from approximately 23,000 sq. ft. of warehouse space in Rajasthan.DeliveriesTwo mini tempos will be required for delivering the purified water jars at various local places. During the initial stage of the business the product will be distributed and transported in the local areas of Rajasthan. MARKETING STRATEGYIn order to effectively and quickly build its customer base, Kent blue aqua intends to aggressively promote its free trial program, offering new customers the use of a company cooler water jars for a period of 30 days free of charge and includes two free bottles of water.In addition, the company will implement a variety of other marketing methods to complement and build on the free trial offer. Since the competition has failed to utilize other marketing methods beyond the free trials, Kent blue aqua will quickly achieve a competitive advantage.FINANCIAL NEED:Sources of fund:The capital will be invested partly by the partners and partly borrowed from the bank.REQUIREMENTS TO START UP THE BUSINESS: Capital, Land, Infrastructure, Bore well, Laboratory: micro lab and chemist lab ISI certification, Machineries: filtration machine, packing machine, filling machine, Labour, Vehicle for transportation

PRODUCTION TARGETS Basis of estimation: 300 Working Days in a Year Single Shift basis 8 hours per shift Packaged Drinking Water Pouches (100 ML)

Quantity (Nos)3000000

Value (Rs)1200000

MANUFACTURING PROCESS As the name itself indicates that the proposed concern will purify the available water in such a way that it may be kept 4-7 days at least as well as it should be a hygienic. The major steps involved on the purification process are given below: Water treatment & Purification Mixing of negligible mineral and necessary for human life. Pouch Filling Inspection and Packing Dispatch QUALITY CONTROL STANDARDS Quality of the product must be according to Beauro of Indian standards (BIS) and parameters of local municipal \ Food Controlling office.

LAND AND BUILDING:Covered areaSq. ft3000

Uncovered areaSq.ftN.A

Whether constructed or rentedConstructed

If constructed, constructed value45,00,000

If rented, rented valueN.A

MACHINERY AND EQUIPMENTS:The plant is a complete full automatic bottle production line from treatment to filling and capping, Labeling and bagging everything is automated.Equipment needed are:1. Standard water Treatment Plant2. Reverse Osmosis System3. Ozonator4. Industrial Filters5. Industrial Ultra violet Light6. Automatic bottling machine8. Semi-automatic PET Blowing machine9. Storage Tanks11 Pallet12. Generating Sets13. Desktop Computer + Printer for office use14. Office and Factory Furniture15. Safety and Protective Gears16. Delivery/Marketing Van + Branding17. Fire Fighting and Prevention Equipment

S.NDESCRIPTIONQUANTITYVALUE

1Ozonator, tank & pump, U.V.System (water processing unit)1140000

2Pouch Packaging Machine, filtration machine, filling machine

1

3Syntex \ StorageTanks1

4Spares, Pipes and other fittings1

5Hand Tools1

6Furniture1

7Sales Tax, Freight & Insurance etc.114000

Total154000

RAW MATERIAL (PER MONTH)The major material used is water. There will be a requirement of bore well for water source. The plant has the capacity to produce empty plastic bottles from PET bottles. Other materials includes treatment chemicals, bottle caps, bagging nylons, and bottle nylon labels.

S.NParticularsQuantity(kg)Value(rs)

1Different Chemicals & other consumables required during cleaning processL.S.5000

2Packaging Material (Plastic Film for pouch packaging)25037500

total42500

STAFF AND LABOUR (PER MONTH)S.NParticularsquantityRate Value (rs)

AAdministrative and Supervisory

1Manager130003000

2Peon220004000

BTechnical (Skilled-Unskilled)

1Skilled labour5300015000

2Unskilled labour320006000

Total28000

OTHER EXPENSES ( PER MONTH)Electricity Charges8000

Fuel Exp.5000

Advertisement & Travelling4000

Transport5000

consumable & stores etc.1000

Potage expenses/ telephones1000

Stationery1000

Repairs & Maintenances10,000

Total35,000

WORKING CAPITAL FOR ONE MONTHS.NDescriptionValue

1Raw material42500

2Salaries and wages18200

3Other expenses24000

Total84700

TOTAL CAPITAL INVESTMENTBuilding and civil works45,00,000

Machinery and equipment15,40,000

Working capital for one month 87400

Total61,27,400

COST OF PRODUCTION PER ANNUMTotal recurring cost per year 1016400

Depreciation on machinery & equipment 15000

Interest on total investment @ 10% 24000

Total1055400

SALES PROCEEDS (PER ANNUM)S.NDescriptionquantityValue (rs)

1Drinking Water Pouches (100 Ml) and 20 liter water jars 30000001200000

Total1200000

PROFITABILITYAnnual Gross Profit 144600

% of Profit on Sales12.05%

Break Even Analysis

Annual Fixed Cost506400

2 Annual Sales 3000000

Annual Variable Cost 690000

Break Even Point 73.39%

SUPPLIERS OF RAW MATERIALS & CONSUMABLES From Local chemical mandi of the area. IMPLEMENTATION PERIOD Proposed Project can commence production within 6-8 weeks after sanction and first disbursement of term loan.

ASSUMPTION FOR GENERATING PROJECT PROFITABILITYNumber of Working Days in a year300 Days

Number of Shifts in a day One

Hours in a Shift8 hours

Plant CapacityConsider on Average production capacities of plant.

Raw material EstimatesBased upon product Mix

Raw Material AvailabilityIn all districts

DepreciationStraight Line Method

ManpowerAccording to project Requirement

Rent estimateN.A

Potential Area of Marketing the productsRailway Station, Bus-stands & Local Hotels / Restaurants of the district .

If project is funded, term loan would be60-80% of Total investment

Moratorium Period6- 12 months

Repayment Period5-7 years

Project may be established underPMEGP (GOI) / Tribal Self Employment Scheme (NSTFDC) or Rani Durgawati Scheme of MP

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