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10 J. Advanced Res. L. & Econ. 1227 (2019)
Magnitude of Financial Distress in Micro, Small and Medium Enterprises (MSMES) in Bihar, India: A Test of Altman Z' Score

handle is hein.journals/jarle10 and id is 1229 raw text is: Volume X, Issue 4(42), Summer 2019 DOI: https:/Hdoi.org/10.14505/jarle.v10.4(42).22 Magnitude of Financial Distress in Micro, Small and Medium Enterprises (MSMES) in Bihar, India: A Test of Altman Z' Score Bishwajeet PRAKASH Rukmini Devi Institute of Advance Studies, Delhi, India bishwaieetdrgmail.com Jainendra Kumar VERMA Department of Economic Studies, Central University of Punjab, Bathinda, India iainendrakumarverma~yahoo.co.in Suggested Citation: Prakash, B., and Verma, J.K. 2019. Magnitude of financial distress in Micro, Small and Medium Enterprises (MSMES) in Bihar, India: A test of Altman Z' Score. Journal ofAdvanced Research /n Law andEconom/cs, Volume X, Summer, 4(42): 1227 - 1239. DOI: 10.1 4505/jarlev0.4(42)22. Available from: httg://iournals.aserspublishing.eu/iarle/index Article's History: Received 1st of April, 2019; Received in revised form 17th of May, 2019; Accepted 20th of June, 2019; Published 30th of June, 2019. Copyright@2019, by ASERS® Publishing. All rights reserved. Abstract: Micro, Small and Medium Enterprises (MSMEs) play a crucial role in equitable upliftment and development of economy. Although these sectors are contributing to economy through generation of employment, supply products, services through indigenous and modern technology, promote social entrepreneurship, reduce regional disparities, and promote equitable income opportunities as well strengthen the balance of trade of the economy. MSMEs are facing actuate deficiency of management which leads to organization in to financial deficiency. Financial Distress in the MSMEs is common for all economy of the world, which has been major concern for the academicians, experts, professional, society, creditors and government. This study identifies the prediction of sickness in MSMEs in Bihar with the help of Altman Z' Score. The study employs the statistical and financial methods to analyze the data collected in the study. The study identifies financial distress in small and medium enterprises through their balance sheet and profit and loss account. The study came out with proper strategy and policy related to revival of the enterprise from the financial sickness and preventing them from industrial sickness. Keywords: MSMEs; financial distress; Bihar; accounting system; financial crunch; Z'-score. JEL Classification: G12; G14; G33. Introduction MSMEs play a significant role in the macro economy of the nation for their contribution to the development of economy by job creation, fostering innovative entrepreneurship, promoting indigenous skills and technology; strengthen the market through goods and services and making economy more competitive (Jena et al 2018). These sectors play an important role to reduce the chronic diseases of economy like regional disparities, poverty and unemployment (Pachouri and Sharma 2016). MSMEs use more labor-intensive technology process, help to more equitable distribution of income, promote Argo-based industries, works as bridge between small and large enterprises, and strengthen the balance of payment of the country (Leutkenhost 2004). MSMEs sectors are helped to generate ample employment opportunities to various sections of the societies and help them into enhance their income level with traditional/modern technological, vocational and other entrepreneurial activities (Tripathi and Yadav 2018). In developed and OECD countries SMEs are predominantly form of enterprises and accounting 93% of total business units. This sector served as the major contribution in employment generation, help to generate 75% of employment, and generating 50% to 60% of total value-added product (OECD 2016). In emerging economy SMEs contribute up to 45% of employment and 30% of GDP (IFC 2010). In India, the contribution of MSMEs in total GDP is 6%, in manufacturing sector 33% and export 45%. The MSMEs widely spread throughout the country, 1227

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