Credit Collection Operations of Micro, Small and Medium-Size Enterprises in Haryana

Abstract

Success of a company is dependent upon its profits, which, in turn, depend upon the velocity of its capital evidenced by reinvestment rate. A faster velocity of capital is largely dependent upon higher rate and frequency of credit collection of companies dependent upon credit sales, as it is in the case of micro, small and medium enterprises (MSMEs). This study explores the average collection period profile of 50 micro, small and medium-sized companies in Haryana using their secondary data compiled from unpublished financial statements from 2009 through 2011. This paper relates the average collection period to company financial performance as measured by net profit on total assets and also investigates whether different industry sectors differ with respect to their collection periods. The study also examined the relationship between collection period and company size by taking into consideration all the MSMEs together and their sub-sectors.