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Manag., December-2019 – Q14

0. As per RBI guidelines (2008), an MSME is considered to have reached the stage of incipient sickness if the following events are triggered:
(a) When there are cost overruns because of the delay in commencement of commercial production by more than 6 months
(b) The enterprise incurs losses for 2 years or cash loss for one year
(c) The capacity utilization is less than 50 percent of the projected level in term of sales
(d) There is an erosion in the net worth due to accumulated cash losses to the extent of 50 percent of net worth during the previous accounting year
Which one of the following is correct?

  • Option : B
  • Explanation : Definition of incipient sickness as per RBI guidelines (2008):
    An account may be treated to have reached the stage of incipient sickness/potential sickness if any of the following events are triggered.
    (a) There is delay in commencement of commercial production by more than six months for reasons beyond the control of promoters and entailing cost overrun.
    (b) The company incurs losses for two years or cash loss for one year, beyond the accepted timeframe on account of change in economic and fiscal policies affecting the working of MSEs or otherwise.
    (c) The capacity utilization is less than 50% of the projected level in terms of quantity or the sales are less than 50% of the projected level in terms of value during a year.
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