Management Notes

Reference Notes for Management

Institutional agencies grant financial assistance to small scale industries for ______________.

Institutional agencies grant financial assistance to small scale industries for ______________.


A. participation in equity capital only.
B. acquisition of fixed assets.
C. working capital assistance.
D. all of the above.

The Correct Answer Is:

D. all of the above.

Financial assistance plays a pivotal role in bolstering the growth and sustainability of small scale industries, which are considered the backbone of any economy. Institutional agencies are at the forefront of this initiative, providing support in various forms.  The correct answer to the given question is option D, “all of the above.”

Correct Answer Explanation: d. All of the above 

This is because institutional agencies grant financial assistance to small scale industries for a range of purposes, including participation in equity capital, acquisition of fixed assets, and working capital assistance.

Participation in equity capital is a crucial aspect of financial support for small scale industries. Equity capital represents the ownership interest in a company and is a vital component of its financial structure. Institutional agencies extend their support by investing in these industries, thereby enabling them to raise the necessary capital for growth and expansion.

This injection of equity capital can be transformative for small businesses, allowing them to pursue new opportunities, develop innovative products, and expand their operations.

Acquisition of fixed assets is another key area where institutional agencies provide financial assistance. Fixed assets encompass the long-term, tangible resources required for business operations, such as machinery, land, buildings, and equipment. For small scale industries, acquiring or upgrading these assets can be a significant financial burden.

Institutional agencies step in to offer loans, grants, or subsidies, making it feasible for these industries to modernize their infrastructure, improve productivity, and stay competitive in the market.

Working capital assistance is perhaps the most immediate and pressing need for small scale industries. It refers to the capital required for day-to-day operations, covering expenses like raw materials, wages, and overhead costs. Access to adequate working capital is essential for the smooth functioning of any business, and small scale industries are no exception.

Institutional agencies offer a range of financial products, including short-term loans and lines of credit, to ensure that these industries have the liquidity needed to operate efficiently.

Now, let’s address why the other options are not correct:

A. Participation in equity capital only:

This option implies that institutional agencies exclusively focus on providing financial assistance through equity capital participation. While equity capital is an important aspect of financial support, it is just one of the avenues through which these agencies extend help to small scale industries. Institutional agencies also provide assistance for acquiring fixed assets and meeting working capital requirements.

Relying solely on equity capital might not be suitable for all industries, as some may have specific needs that require a different type of financial support.

B. Acquisition of fixed assets:

This option correctly identifies one of the areas where institutional agencies offer assistance. Acquiring fixed assets is essential for the growth and development of small scale industries. However, this option falls short in capturing the full spectrum of financial support provided by institutional agencies.

It does not account for the fact that these agencies also facilitate participation in equity capital and provide working capital assistance, which are equally crucial for the success of small businesses.

C. Working capital assistance:

While this option accurately acknowledges the importance of working capital assistance, it oversimplifies the scope of support provided by institutional agencies. Working capital is indeed a critical component of a business’s financial health, ensuring its day-to-day operations run smoothly. However, it is just one facet of the multifaceted assistance offered by institutional agencies.

This option neglects to mention that these agencies also extend support for equity capital participation. They also, help in acquiring fixed assets, which are integral aspects of the financial well-being of small scale industries.

In summary, while each of the options presented in the question addresses a valid aspect of the financial assistance provided by institutional agencies. None of them captures the full spectrum of their support. Option D, “all of the above,” is the most accurate choice. As it encompasses participation in equity capital, acquisition of fixed assets, and working capital assistance.

This comprehensive approach aligns with the diverse needs of small scale industries, ensuring they receive the necessary financial backing for their growth and sustainability.

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