View of FACTORS AFFECTING FINANCING AND WORKING CAPITAL MANAGEMENT IN PHARMACEUTICAL SMALL ENTERPRISES OF PITHAMPUR, MADHAYA PRADESH

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VOLUME: 10, Special Issue 02, (IC-IMAF-2023) Paper id-IJIERM-X-II, January 2023 124

FACTORS AFFECTING FINANCING AND WORKING CAPITAL MANAGEMENT IN PHARMACEUTICAL SMALL ENTERPRISES OF PITHAMPUR, MADHAYA PRADESH

Dr. Jitendra Nimbodiya

Assistant Professor, Shri Umiya Kanya Mahavidyalaya, Rau, Indore

Abstract – Financing and working capital management is the key concept for successful completion of any venture. In order to manage a small business and its successful operation, it is important to understand which factors affect the organizations financing and working capital need. The main objectives of this paper is to explore the concept of financing and working capital management in entrepreneurship and to study the factors associated with financing and working capital management in pharmaceutical small enterprises of Pithampur, Madhaya Pradesh. The primary data collected from entrepreneurs of pharmaceutical small enterprises through field survey and put to perform factor analysis.

Keywords: Entrepreneurship, Pharmaceutical Small Enterprises, Financing and Working Capital Management.

1 INTRODUCTION 1.1 Financing

Financing means the techniques and forms of finance a business uses to sustain and grow its operations. It consists of different instruments of finance, which are used to carry out capital investments. The decision about source of financing is ultimately define a company’s capital structure. The best capital structure for a business is typically considered that which results in the lowest cost of capital (CFI, 2023).

1.2 Working Capital Management

Working capital management refers to managing fund for their day to day operations it also monitor assets and liabilities of the company's to maintain adequate liquidity to meet its shortterm operating costs and short-term debt obligations. Managing working capital is important to improve a company's cash flow management and earnings quality by using its resources efficiently (Tuovila, 2022).

1.3 Pharmaceutical Industries in Madhya Pradesh

The Indian Pharmaceutical Industry stands today in front rank of India’s science-based industries with wide ranged capabilities in the very complex field of drug manufacturing and technology (Pharmaceutical Drug Manufacturer, 2019). Madhya Pradesh is one of the fastest developing states in Pharmaceutical sector of India. The Madhya Pradesh State government constructed multiple-shed complexes in 1958, enabling provision of basic infrastructure, which attracted pharmaceutical entrepreneurs to start business and industry. In Madhya Pradesh Pithampur has performed as the most dynamic pharmaceutical Industrial zone In the last decade, Pithampur, a well-developed industrial area, 20 km away from Indore has large number of micro, small and medium scale industries including medicine manufacturing. Companies of national and international repute are also functioning in this area representing medicine and pharmaceutical industry (Pharmaceuticals, 2019).

2 REVIEW OF LITERATURE

The present situation of Micro, Small and Medium Enterprises (MSMEs) and support systems available in India as well as in the global context were critically analyzed. It was suggested that Micro, Small and Medium Enterprises (MSMEs) in India should have access

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to alternative sources of capital as angel funds, risk capital, etc. (Exim Bank of India, 2012).

A study on ‘Working Capital Management and Performance of SME Sector’ highlighted the importance of working capital management in the Micro, Small and Medium Enterprise (MSME) sector and suggested that number of days of accounts payable had positive association with profitability, whereas, average collection period and inventory turnover had inverse relation with performance (Gul, 2013). Access to external finance apart from banks was costly and limited. Their becoming costlier and limited, posed challenge to Small and Medium Enterprises (SMEs). The external loan products also required collateral securities and were highly priced. In general, Small and Medium Enterprise (SMEs) used finance from NBFCs and informal sources at higher rates of interest, particularly, in their early stage of business (Biswas, 2014).

2.1 Objectives

 To explore the concept of financing and working capital management

 To study the factors associated with financing and working capital management in pharmaceutical small enterprises of Pithampur, Madhaya Pradesh

2.2 Research Methodology

The study is explorative in nature. A purposive and random sampling technique was adopted so as to overcome the difficulty associated with data collection. Administering questionnaires only those who were owner and had entrepreneurial positions in their organizations considered for sample. For the main study a sample of 112 entrepreneurs were taken. Field survey was done to collect the primary data. Primary data was collected using a set of questionnaires in 5 point Likert scale and the secondary data from authentic sources were used in this study. Factor analyses were conducted using SPSS 16.0 for WINDOWS. The results have been presented separately.

3 RESULTS AND DISCUSSION

The first stage of scale development was performed to identify the attribute of financing and working this was executed in the primary phase through intensive review of literature and consequent conceptual content development. The summery of financing and working management is shown in Table No.1. which is as follow:

Table No. 1 Summary of Project Management Statements

Reliability Test

In order to measure reliability of data, Cronbach’s Alpha was calculated to find out the internal consistency of the item statement. The details are shown in Table No.2. which is as follows:

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VOLUME: 10, Special Issue 02, (IC-IMAF-2023) Paper id-IJIERM-X-II, January 2023 126 Table No. 2 Reliability Statistics

Alpha value more than 0.6 generally indicates satisfactory level (Malhotra, 2004). In the research the Cronbach’s Alpha value was found 0.717 which is more than the required alpha value that indicated good consistency among items (Mahlangu and Kruger, 2015) and the tools so developed for the study stand reliable. The item statements identified further treated with factor analysis.

3.1 Factor Analysis

For performing factor analysis, questionnaire consisting 18 statements. Factor analysis performed individually.

3.2 Kaiser-Meyer-Olkin (KMO) Test and Bartlett’s Test of Sphericity

The results summery of KMO and Bartlett’s Test on financing and working capital statements are shown in Table No. 3 which is as follow:

Table No. 3 KMO and Bartlett’s Test

The results value of Bartlett’s test of sphericity is significant (p=0.000). and the Kaiser- Meyer- Olkin measure is .548 which is greater than standard value 0.5 then factorability is assumed.

4 RESULTS OF FACTOR ANALYSIS

The summery of result of factor analysis on 18 variables which are shown in Table No.4.

Table No. 4 Factor Analysis Summary for Financing and Working Capital Management

Table No.4. showing the result of factor analysis, there were 18 items before factor analysis, after factor analysis 1 item eliminated and remaining 17 items selected. Factor analysis found total 7 factors.

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4.1 Factor Loading, Percentage of Variance and Nomenclature of Factors for Project Management

Principal Component Analysis and Eigenvalues greater than 1 used as data extraction technique which retains or extracts all the factors (Kaiser, 1960). Varimax rotation technique is selected in the study because varimax rotation presents the extracted components clearer and easier for interpretation (Field, 2009). The summery of Factor Loading, Percentage of Variance and Nomenclature of financing and working capital management are shown in Table No.5. which is as follow:

Table No. 5 Nomenclature of Factors for Financing and Working Capital Management (0.6 Cut-Offs for Factor Loadings)

5 DISCUSSION

The factor analysis was performed to identify the critical success factor of financing and working capital management in small enterprises. On the basis of factor analysis results, the discussion are as follows:

Factors, Export Credit, Financing from Banks and Family, Bill Discounting, Bank Loan, Working Capital Loan from Friends, Banking Products and Loan Proceeding are strongly affect the performance of the small pharmaceutical business in pithampur, Madhya Pradesh.

6 CONCLUSION

The factor analysis was performed to identify the critical factor of financing and working capital management in small enterprises. In the research the Cronbach’s Alpha value was found 0.717 which is more than the required alpha value that indicated excellent consistency among items and the tools so developed for the study stand reliable. The result of factor analysis on financing and working capital management shows that there were 18 items before factor analysis, after factor analysis 1 item eliminated and remaining 17 items selected. The Factor analysis result found total 7 factors. The nomenclature are as follows:

Export Credit, Financing from Banks and Family, Bill Discounting, Bank Loan, Working

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Capital Loan from Friends, Banking Products and Loan Proceeding. The study conclude that these 7 factors are the most success factor that could explain the significant impact on the successful financing and working capital management of small enterprises.

7 SUGGESTIONS

The small entrepreneur should approached to banks for export credit, financing, bill discounting and for term loan. Entrepreneur can also take loan from family. Entrepreneur should focus on working capital management. Entrepreneur should take loan from bank.

Entrepreneur can also take loan from friends for working capital.

REFERENCES

1. Biswas, A. (2014). Financing Constraints for MSME Sector. International Journal of Interdisciplinary and Multidisciplinary Studies, 1(5), 60-68.

2. CFI, (2023). Financing, The methods and types of funding used by a business to sustain and grow its operations. Cited at:

https://corporatefinanceinstitute.com/resources/wealthmanagement/financing/.

3. Exim Bank of India (2012). Strategic Development of MSMEs: Comparison of Policy Framework and Institutional Support Systems in India and Select Countries, Occasional Paper No. 153.

4. Field, A. (2009). Discovering Statistics using SPSS. Sage: London.

5. Gul, Sajid (2013). Working Capital Management and Performance of SME Sector. European Journal of Business and Management, 5(1), ISSN 2222-1905.

6. Kaiser, H. F. (1960). The Application of Electronic Computers to Factor Analysis. Educational and Psychological Measurement, 20, 141-151.

7. Malhotra, Naresh K. (2004). Review of Marketing Research. Howard House: Emerald Group Publishing.

Cited at:

https://books.google.co.in/books?hl=en&lr=&id=sYiSI4dmHZMC&oi=fnd&pg=PR9&dq=Malhotra,+Naresh+K .+(2004).+Review+of+Marketing+Research&ots=mQO7KpAMp1&sig= WbH_qDqTbUUpr-9caA5NZ-89gT4.

Visited on: 24th February, 2020.

8. Pharmaceutical Drug Manufacturer. (2019). Indian Pharmaceutical Industry. Cited at:

http://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-industry/. Visited on: 27th December, 2019.

9. Pharmaceuticals (2019). Vender Development Program: A Madhya Pradesh Government initiative for Micro

& Small Enterprises (MSEs)/Startup. Cited at: http://www.mpvdp.in/pharma.aspx. Visited on: 1st March, 2020.

10. Tuovila. Alica, (2022). Working Capital Management Explained: How It Works. Cited at:

https://www.investopedia.com/terms/w/workingcapitalmanagement.asp.