POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Chapter I

THE PROBLEM AND ITS SETTINGS

Introduction

Various researches had long highlighted the importance of financial literacy in success

of Micro, Small, and Medium Enterprise. The research discusses further hypothesis in the

performance and growth of MSMEs throughout the nations, had been a great concern to,

among others, development economists, entrepreneurs, governments, venture capital

firms, financial institutions and non-governmental organizations (Eniola & Entebang,

2014.) MSMEs are facilitators for broad-based growth in competition, entrepreneurship

and offer economy-wide benefits such as innovation and aggregate productivity growth

(Tarfasa, Ferede, Kebede & Behailu, 2016). MSMEs contribute largely to output,

employment in both developed and developing countries and contribute greatly to the

revitalization of the global economy and of individual national economies (Paul, 2009

Many countries have developed strategies for the implementation of financial education to

improve financial literacy of their population as it is perceived as a life skill necessary for

intelligent financial conduct in modern life and an important basis for the economic and

financial stability of society and the state (Tali, 2016). Some authors studied the

importance of individual financial literacy (Cheng & Volpe, 1998; Lusardi and Mitchell,

2007a, 2007b, 2008, 2011; Lusardi et al., 2010; Filotto & Nicolini, 2010; Atkinson & Messy,

2012; Bongini et al., 2012; Nicolini et al., 2013; Bongini et al., 2016) on different kinds of

decision. Their results show that people with a low financial literacy are less able to

planned for retirement (Lusardi& Mitchell, 2007; Van Rooij et al., 2011), were more likely
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to take up high-interest mortgages (Moore, 2003) and often have problems with debt

(Lusardi & Tufano, 2009) Brown, Berman, Saunders & Beresford (2006) subscribed to the

general principle of good business through financial literacy. Good business leads to

competitiveness in the globalized community (Borodich et al., 2010).

Financial literacy had been the brightness of the new business reality in the

capability to adequately oversee financial resources over the life cycle and connect with

effectively with financial products and services. Remund (2010) stated that financial

literacy is the degree to which one understands important financial concepts and

possesses the capacity and confidence to handle personal funds of appropriate, brief

period decision-making and solid long-term financial forethought. Financial literacy was

about discernment and makes effective decisions on utilization of financial management

(Gavigan, 2010).

Financial literacy had also been the mastery of a set of knowledge, attitudes and

behaviors (Nkundabanyanga & Kasozi, 2014). It can be among the essential strategic

tools to more organize allotments of financial resources and to a considerable financial

strength.

Background of the Study

The Financial literacy level among the Filipino remains alarmingly low—an issue that

starts with poor childhood education that continues until their adult years, as indicated by

the country‘s financial regulators. According to Standard & Poor‘s (S&P) Evaluations

administrations overviewed last 2015 by manila times, just 25% of Filipinos are financial

literate. Which means, around 75 million Filipinos have no clue about investing, budgeting,

spending, acquiring loans and even the idea of savings. According to dulay (2019) there
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was even established a law three years ago, ―The Republic Act 10922‖ or the "Economic

and Financial Literacy Act," which orders a few government organizations to direct

"education and financial education as a vital piece of formal adapting." Aside from the law,

other government foundations, organizations and NGOs have made it their main goal to

spread the good news of financial literacy, especially to the underprivileged and under-

served population. As Mandell (2009) characterize financial literacy as "the capacity to

utilize information and aptitudes to deal with one's money related assets successfully for

lifetime financial security" and Huston (2010) as he clarifies that financial literacy is

comprised of two components: understanding and use. Understanding financial literacy

implies that an individual is educated about personal finances, and applies such

information in managing one's accounts.

This study had been conducted to determine the importance of financial literacy on

the success of an enterprise in investing, budgeting, spending, savings and acquiring

loans. The researchers wanted to utilize this study to educated aspiring individual who

wanted to build and success of their enterprise. Likewise, the researchers wanted to bring

ideas in the field of business that being financial literate is a big impact to their enterprise.

Further, this would intend to fill in as guide in accomplishing financial decision as

educators or as financial advisors.

Theoretical Framework

The researchers provided theories about importance of financial literacy on the

success of an enterprise that supports and strengthen the affiliation of the theories about

the given research theme. Here are following theories that are related to the study:
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The production of human capital and the life cycle of earnings

The application of capital theory is to decide on individual improvement, and

specifically improvement of acquiring limit. It gives an examination to understanding of

numerous part of observed behavior as rational investment of present assets to enjoy

future returns. The detailing by Friedman and Kuznets (1945) and the critical improvement

of the theory by Becker (1962, 1964) and Mincer (1958, 1962) gave a novel perspective

on life cycle income by connecting it to the time profile interest in human capital: People

make the majority of their investment in themselves when they are youthful, and to a huge

degree by prior current profit. Observed profit are along these lines moderately low at early

years, and they ascend as venture decreases and as profits for past speculations are

figured it out. The primary motivation behind why speculation is embraced for the most

part by youthful is that they have a more drawn out period which they can get returns on

their venture.

Personal Budgeting Theory

Many studies argue that personal budgeting is a pervasive part of consumer

behavior. (1) Personal budgeting denotes the practice of grouping expenditures into

categories and constraining each with an implicit or explicit spending limit that applies to a

specified time period (a week, a month, etc.). (2) This practice cannot be explained by the

classic life-cycle theory of the consumer. Nonetheless, it has important consequences. It

can account for ―mysterious‖ large differences in wealth accumulation between

consumers, which cannot be explained by time or risk preferences (Ameriks et al., 2003).

By violating the principle of fungibility of money, it shapes consumer demand in ways

which cannot be explained by satiation and income effects (Heath and Soll, 1996). It
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`

affects how firms promote their products so as to avoid falling into the same category with

other firms and thus compete for the same budget (Wertenbroch, 2002). It is at the

foundation of the economics of commitment devices (Bryan et al., 2010) by creating a

demand for personal budgeting services. Almost all existing studies informally suggest that

consumers use personal budgets to manage self-control problems, often caused by

present bias, which interfere with their saving goals. Thaler (1999) argues that households

group expenditures into category specific budgets (housing, food, etc.) ―to keep spending

under control.‖ According to Ameriks et al. (2003), ―many households that set up regular

budgets regard this activity as contributing to a reduction in their spending. These results

support a theory in which the channel connecting wealth accumulation and the propensity

to plan operates through a form of effortful self-control‖. Antonides et al. (2011) find a

positive correlation between budgeting and having savings goals.

The Economic Importance of Financial Literacy: Theory and Evidence

The relevance of this theory to the study as Lusardi and Mitchell (2013) Stated when

economic approach to saving and consumption decision that fully rational and well-

informed person will consume less than his income in times of high earnings and he will

save to support consumption when income falls. Where some of individuals are impulsive

to buy unnecessary things for themselves without thinking twice, Modigliani and Brumberg

(1954) and Friedman (1957) the consumer is placed to arranged his ideal saving and

decumulation examples to cover minimal utility over his lifetime.

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Conceptual Framework

This framework shows the overall outline of the study. It can be express by using the

input-process-output framework (IPO).

Figure 1 Conceptual framework of the Importance of financial literacy on the success of an

enterprise

INPUT PROCESS OUTPUT

 The respondent in
terms of Age, Sex,
Educational
Attainment, Nature of
business and Years of
Operation.
 The respondents
practice financial
literacy in (the
following factors of)
Investing, Budgeting,
Spending, Savings,
and Getting loans.
 Significant difference
in the perception of
the respondents on
the extent of
importance when they
are grouped
according to profile.
 Determined
 Descriptive importance of
financial literacy in
Research terms of Investing,
Budgeting,
Spending, Savings,
 Survey
and Getting loans
Questionnaire
towards Enterprise
over-all success.
 Statistical
 Importance of
Treatment being financially
literate in different
aspects if they are
 Analysis of Data
grouped according
to profile.
 Profile of
respondents
determined.

FEEDBACK

Figure 1 The conceptual model used in this research study is the input-process-

output model where it shows the series of boxes that are connected to each other. The

input of the study includes the following: (1) profile of the respondents with regards to Age,
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Sex, Educational Attainment, and nature of business; (2) the importance of financial

literacy in the success of enterprise in terms of investing, budgeting, spending, saving and

getting loans; (3) the significant difference of each aspect of financial literacy when they

are grouped according to profile.

The second frame contains the methods and procedures to be used to analyze those

variables by making survey questionnaires and by the use of statistical tools.

The research output has been: (1) Determined the effectiveness of financial literacy in

terms of Investing, Budgeting, Spending, Savings, and Getting loans towards enterprise

over-all success. (2) Importance of being financially literate in different aspects if they are

grouped according to profile.

Statement of the Problem

The main purpose of this study is to identify the importance of financial literacy of the

success of an enterprise in Avenida, Sta. Cruz, manila.

Specifically, this study sought to answer this following question:

1. What is the profile respondent in terms of:

1.1 Age

1.2 Sex

1.3 Education Attainment

1.4 Nature of Business

1.5 Years of Operation

2. To what extent do the respondents perceive the importance of the following aspects of

financial literacy on the success of an enterprise?

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\
2.1 Investing

2.2 Budgeting

2.3 Spending

2.4 Savings

2.5 Getting Loans

3. Is there any significant difference in the perception of the respondents on the

importance of the different aspects of financial literacy when they are grouped according

to profile?

Hypothesis

There is a significance difference on the financial literacy of the respondents in terms

of age, sex, nature of business, educational attainment and years of operation.

Scope and Limitation

This study assessed the importance of financial literacy on MSME owners towards

success. The respondents of the study were composed of various MSME owners in

Avenida, Sta Cruz, Manila. This research does not include the large enterprises that are

accounted for only .43% of the operating business in the Philippines (MSME STATISTICS,

PSA 2016). The study will choose business enterprises that operate for at least 1 year and

above.
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Significance of the study

The result of this study will provide information and become a helpful tool to the

following entities:

To the Micro, Small, and Medium Enterprise Owners, in understanding further

the importance of financial literacy in terms of Investing, Spending, Saving, Getting loans

and Budgeting.

To the Students of Entrepreneurship, who aspire to be an entrepreneur, of that

being financial literate will help them in financial decision-making.

To the College of Business Administration, that pursuing financial education

among the students will influence their attitudes and behaviors towards money

management.

To the Future Researchers, the findings of this study will provide information in

enhancing knowledge and understanding about the Importance of financial literacy to

entrepreneurs as a tool towards the success of an enterprise.

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DEFINITION OF TERMS

For better understanding and interpretation of this study, the following terms are

operationally defined:

Budgeting is a plan of operations based on such estimate. This would help the

individual to track down their necessary needs.

Economic Stability is a term used to describe the financial system of a nation that

displays only minor fluctuation in output growth and exhibits a consistently low inflation

rate.

Enterprise is an already formed business organization that proposed some goods or

services.

Entrepreneur is a person who owns and runs a business.

Financial Literacy is a knowledge and understanding on how money work, spent,

and also saved, as well as the skills and ability to use financial resources to make

decisions.

Acquiring Loans this is where money that someone borrows from the bank for a

period of time during which they pay interest.

Investing is committing money, time or energy for a future benefit.

Savings refers to the money you put aside for future use rather than spending it

immediately

MSMEs are an abbreviation term of ―Micro and Small-Medium enterprises‖ that are

businesses that maintain revenues assets or a number of employees below a certain

threshold.

Spending the amount of money that is spent, especially by a government or other

organization
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

CHAPTER II

REVIEW OF RELATED LITERATURE AND STUDIES

A review of related literature was conducted to establish a need for this study with

the purpose of determining the importance of financial literacy in entrepreneurial success.

This chapter presents the related literature about financial literacy on success of

enterprises. It includes the theory, articles and relation to the variables of the studies and

focuses on various aspect of the financial knowledge.

Entrepreneur’s Financial Literacy

Financial literacy has been identified as a one of the key competencies required for

the establishing, management and thriving of MSMEs. However, the exact effect they

have on the financial performance of MSMEs hasn‘t been fully established by the available

literature thus the need for further research in this area (Chamwada, 2015).

A recent study found that 40% of small business owners consider themselves to be

financially illiterate. At the same time, 81% of them are doing their business' finances

themselves (Intuit. Inc., 2014). According to Borg (2017), entrepreneur encounters a lot of

complicated scenarios which requires complex decisions. Financial literacy helps them

understand their financing options and decision making.

The Association of Chartered Certified Accountants (ACCA) presents the following

list of ‗financial education needs‘ for entrepreneurs:

1. to distinguish between personal and business finances;

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2. to be a competent buyer of financial services – understanding financial products,

their costs and risks;

3. to anticipate the business‘ future financial needs under alternative scenarios;

4. to assess the risks to which the business is exposed and prepare appropriate

responses;

5. to understand the decision-making process of finance providers, and thus appreciate

how the business can become creditworthy or investment-ready;

6. to relate the business‘ financial needs to a country‘s regulatory and fiscal framework

– to appreciate the notions of regulatory and tax efficiency;

7. To exercise financial management – i.e. to use financial information to analyze

business performance and create policies and controls that optimize this.

Financial literacy is not relatively new to the business world. It has always been a

tool for having a successful business and lifestyle. According to Mbazigwe (2013), our

level of financial literacy affects your quality of life significantly. It affects your ability to

provide for yourself and family, your attitude to money and investment, as well as your

contribution to your community. The financial literacy enables people to understand what

is needed to achieve in life and business that is financially balanced, sustainable, ethical

and responsible. The reason why people must need to be educated in financial literacy

through financial education because it‘s important to have a financial knowledge, Cook

(2018) stated that the financial education can be defined in many ways and what makes

someone have a good understanding or a bad understanding is completely subjective.

Furthermore, the literature greatly focused on the importance of financial literacy to

entrepreneurial success.
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Financial education is indeed an imperative, considering the country‘s low financial

literacy levels. A demand side survey shows that Filipino adults can correctly answer only

three (3) out of seven (7) financial literacy related questions covering basic numeracy,

computing compounding interest, fundamentals of inflation, and investment diversification.

Only two percent (2%) of Filipino adults answered all questions correctly .The study also

showed that Filipinos lack specific knowledge to make informed financial decisions.

However, the same study indicated that money management habits formed in childhood

stay into adulthood. Those who began saving as children display better attitudes to saving,

and tend to outperform their counterpart group who did not develop the habit early in the

areas of choosing financial products and services, monitoring expenses and planning for

retirement(World Bank, 2018).

The Role of financial knowledge in MSMEs

Financial knowledge is one of the most important determinants of the capital

structure that will enable the growth and development of the small and medium-sized

enterprise sector, as well as greater competitiveness of enterprises, regardless of size,

activity, industry and the form of ownership of these enterprises (Kurtović, 2016).

In addition financial literacy is now globally recognized as a major factor of

economic and financial stability and development of MSMEs for performance (Eniola &

Entebang 2016) that the study will serve as an information because that will promote and

orient MSMEs firm performance towards financial awareness, knowledge and perceive

attitude towards the goal of the business. Somehow financial education is less effective for

low-income clients as well as in low- and lower-middle income economies according to

Kaiser and Menkhoff (2017) because of specific behaviors, such as the handling of debt,
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are more difficult to influence and mandatory financial education tentatively appears to be

less effective this means that every owner should learn about how finance work in a firm to

fully succeed in business.

According to Greene (2014) the financial literacy was assessed in three ways:

objective financial knowledge, subjective financial knowledge, and subjective financial

management ability where both subjective financial knowledge and subjective financial

management ability were positively associated with the three long-term and the four short-

term financial planning and managing behaviors while moderating for the age cohort

effect.

The Financial knowledge is related to financial well-being that implicates and

recommends the future research, teaching, rules and policies for parents, educators,

counselors, financial advisors and other professions.

According to Morgan (2017) it‘s a common among educators to reflect their

student‘s financial literacy skills and economic condition of the majority of the Filipino

people. He recommends the curriculum inclusion of financial education to both basic and

higher education must improve the financial teaching, knowledge, behaviour and attitudes

among teachers and students.

Deniss (2010) discusses the problem of low financial literacy levels that people

have in today's world and how financial literacy levels can be improved through school

education although Filipinos faced these challenges includes the lack of adequate

knowledge on financial management, high cost of doing business, lack of access to

finance and market information, and low productivity and competitiveness due the lack of

economic capacity in the Philippines, those Filipinos that already have the knowledge and
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 15

skills to share their experience about financial literacy concepts can ensure the

sustainability of an economy in the of the Philippines.

The importance of financial knowledge on attitude and on actual financial behavior is

given special emphasis. Second, literature on the measurement of financial literacy had

been presented including attempts to come up with a financial literacy scale and

performance in small and medium enterprises.

Determinants of Entrepreneur’s Financial Literacy

There are lots of significant keys to have a successful business and one of the

infamous ways is in the form of investing. Investing always contains risk as the business

you invest in could go down in value or even close down completely. According to Klarman

(2017), the secret to investing is there is no real secret to investing. There is no certain

way to predict what the market will do. Klarman also points out that by controlling the risk

and limiting the loss through depth analysis and endless patience value investors can

expect limited downside in their enterprise.

In addition, Tresidder (2018) states that financial literacy, especially in investing, is

the essential skill you must develop if your goal is to build wealth and enjoy financial

security. Throughout the literatures regarding the importance of investing in

entrepreneurial success, the results point out towards common theme that having

knowledge in investing increases the chance of your business to run smoothly. It might not

be able to predict the future of market but it certainly proves that it can help them get ready

for it.

A successful product development strategy can also increase revenue and

profitability, but careful planning is essential to minimize the risk of costly mistakes (Linton,
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2018). Lower costs give you the flexibility to lower your prices and win new business or

maintain prices and increase your profit margin. Kevin Johnston (2012) added that when

you invest in a new product, you open new possibilities for your business to survive and

grow. New product not only generates more profit but also builds trust to your customers.

However, investing in new products also has some disadvantage. Innovating new product

means you are the first to put the product in the market, First to market also means the

first to be exposed to the issues uncovered when a product gets put into real-world

applications for the first time (Root III, 2018).

Elizabeth Mott (2018) mentioned that investing in new product and making your

brand visible/advertising are two of the most important thing to invest to. Engaging with

people who gravitate toward your brand enhances your opportunities for sales and

referrals. In addition, Obaiche (2015) stated that funding advertisements is the best way to

communicate to customer, it helps you inform the about the brands available in the market

and the variety of products useful to them. Greene (2018) also highlighted that advertising

is one of the most efficient investment an SME would do, especially in this era, as social

media is easily accessible in this generation and almost free.

However, Justin Johnson (2018), stated that no matter how daunting these

aspirations may seem, there are clear advantages to expanding a small business. While

there are disadvantages to expansion, the advantages and benefits received from

expanding a business may far outweigh them. Aaron Marquis (2018), added that

expanding your business allows you to produce more products in its most efficient way,

not only it widens your customer base it also help you earn more profit. When you expand

business it often spread the risks of doing business and reduces the potential of one

product or one poor decision damaging your business (Kokullomer, 2018)

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Budgeting in financial Literacy of enterprises

Budgeting is one of the most important tools in the success of enterprises. Without

studying of how to budget the money of the enterprises it would be the cause of a

problem that will turn the business on the verge of bankruptcy that force to close of the

business for not being able to pay the debt. That case would be cause of a failure of the

owner for not measuring the proper controlling and monitoring of the financial of the

enterprises.

Budgets are important to MSMEs because they provide future-oriented information

which facilitates monitoring and control of business performance (Hallsworth, 2015). They

do so by highlighting areas in which actual performance deviates from the budgeted

(planned) performance, so that an appropriate corrective action can be taken (Akande &

Oluwaseun, 2014). By so doing, budgets facilitate management by exception, as the

decision makers are able to isolate problem areas that need urgent attention, an approach

that results in effective problem resolution (Dima, 2013).

In addition, budgets facilitate coordination and alignment of different departments

within a business towards common objectives by providing a bigger picture of the desired

objective pursued by an SME (Hill, 2015). By quantifying the desired objectives, budgets

minimize confusion and create a common understanding of the objectives, thereby easing

communication. The study aims to determine the types of budgets used, methods of

budgeting employed, purpose for which budgets are used, perceived effectiveness of

budgets used and factors that may inhibit MSMEs from using budgets.

The findings also revealed that budgets were mostly used for monitoring,

measuring business performance; future planning and control purposes. Gwenn Wilson

(2014) determines that it‘s a matter of choice to achieve the financial success and it is not
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 18

a matter of chance. Atkinson, A. and F. Messy (2012) determine that a financially literate

person will have some basic financial knowledge of key financial concept. It also important

to run the business as A. and F. Messy (2012) stated which the person behaves will have

a significant importance on financial well being.

Ostergren & Stensaker (2011) mentioned that the budgeting is traditionally

described or give a meaning as a common accounting tool that organizations use for

implementing strategies and budgeting is presented, emphasizing both advantages and

disadvantages of traditional budgeting. The purpose of the budgeting is to give those

targets and plans financial values, making the progress easily measurable and to

transform the strategic ideas into understandable operative actions (Hanninen, 2013).

According to de Waal (2011) the traditional budgets are seen by practitioners of

being incapable of meeting the demands of the competitive environment and are heavily

criticized for impeding efficient resource allocation and encouraging budget games.

A budget is an expressed in financial terms it is a financial reflection of the

organization‘s annual operating plan. The budgeting process implies setting strategic

goals and objectives, developing forecasts for revenues, costs, productions, cash flows

and other important factors. It is a process in which the budget is determined in several

rounds of dialogue between higher and lower management levels. Over the year the

organization checks regularly if the targets are reached de Waal (2011).

The Significance of Financial Literacy in Spending

The discourse of spending is important if finance is of concern. Those who save

money realize the fact that wise spending leads to saving and hence investing. Financial

education refers to knowledge or an understanding on the importance of money and the

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use of money, it answers the question, why spend on this as opposed to that. The most

common definition of financial literacy is the ability to make appropriate decisions in

managing their personal finances (Norman 2009; Gove et al., 1961).

Enterprise and organizations which spend unwisely will always cry for budget

deficit. Therefore, this paper provides a discussion on the importance of financial literacy

in making informed decision on spending. In this vein Sigalla (2009) argued that if we

cannot plan for our daily endeavors of our own money how can we plan for public funds

which are generally considered as own less funds and if we cannot ascertain their needs

and hence allocate finances objectively, they will fail to allocate the same for their

governments. This perhaps explains why financial literacy programs have a stronger

leaning toward financial management for entrepreneurship to the neglect of personal

financial management (Xu and Zia, 2012).

According to Marmanis (2008), spending is the amount of money that is spent in

particular period of time, whereas spend analysis is the process of collecting, cleansing,

classifying and analyzing expenditure data with the purpose of decreasing procurement

costs, improving efficiency, monitoring controls and compliance to make the money reach

financial goals also method for tracking spend includes receiving a plurality of accounts

payable items. Spend analysis can help improve several areas: the identification of cost

reduction opportunities, the prioritization of sourcing projects, the negotiated results, and

the tracking and monitoring to ensure that negotiated results reach the bottom-line.

Numerous real-world cases and captivating examples help students gain contextual

insights and knowledge into the strategies, processes, and practices of supply

management--giving these future managers a thorough understanding of the importance

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 20

that purchasing and supply chain management have on the competitive success and

profitability of today's organizations (Patterson,2015).

Prior research shows that personal savings are one of the most important financial

sources for start-ups of entrepreneurial firms. The lack of personal savings and seeming

shortage of financial knowledge could contribute to the low incidence of new venture

creation, and the high failure rate amongst South African entrepreneurs (Smit, 2008).

When the financial literacy skills of entrepreneurs fall short of those needed to operate a

successful business, it is more than the individual business at risk (Dahmen, 2012). Given

the civil society approach leads to modest benefits and seeks to control the risks of

financialization, there is evidence that it makes a positive contribution toward participants‘

economic position, and in some cases we see evidence that it builds their sense of human

well-being (Buckland, 2018).

Osman (2018) added that the task of entrepreneurs does not only focused on

purchasing, allocating, and distributing the resources efficiently, but to be able to

understand the running of the business in terms of possessing the knowledge on

accounting, costing, and budgeting. Scholars, policy officials, financial experts and

consumer advocates have used the phrase loosely to describe the knowledge, skills,

confidence and motivation necessary to effectively manage money (Remund, 2010).

Synthesis

It is strongly believed that financial literacy had been evidently helpful to

entrepreneurs success.The researchers have assessed the importance of financial

literacy‘s components to the success of an enterprise, the financial literacy‘s major key

components have shown direct implication on entrepreneur‘s ability to make wise decision
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 21

making (Hoyt, 2018). In relation to this, The President‘s Advisory Council on Financial

Literacy (PACFL, 2008) added that the financial literacy is the ability to use knowledge and

skills to manage financial resources effectively for a lifetime of financial well-being. And

Financial education as a process by which people improve their understanding of financial

products, services and concepts, so they are empowered to make informed choices, avoid

pitfalls, know where to go for help and take other actions to improve their present and

long-term financial well-being.

However, a recent study shows that these factors in having a successful business as

SME are bound to change according to trend and generation (Power, 2018). The

knowledge and understanding the product and services that are relevant to the issues that

people have to deal with in their everyday lives in which changes defending on inflation

and such. In the study of Beeson Gregory (2018) he found out that MSME‘s are more

flexible than other types of businesses and has more chance of adapting to technological

changes in this generation and more likely to be able to cope up with peoples everyday

needs.

Lusardi & Tufano (2009) found a positive correlation between financial literacy and

saving, investment and planning. As a matter of fact, a lot of studies were conducted to

determine the level of financial literacy of different individuals. However, as the constant

change in the market and economy, improving and adapting to changes has become a

very vital problem, especially to MSME, in money management of a business. The inflation

rate and constant improvement changes in technology drastically affects that financial

literacy studies in each generation (Remund, 2010).

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

CHAPTER III

METHODOLOGY

This chapter presents the research design, sources of data, instrumentation and

data collection and tools for data analysis relative to the different problems raised in

the study.

Method of Research

This study adapted descriptive survey method. Since this study is aimed at providing

the importance of Financial Literacy on the success of MSME‟s in Avenida, Sta. Cruz,

Manila. The relevance of this method is due to the fact that respondents were involved

thorough interview and surveys requiring them to provide their opinion on specific factors

relating to the importance of financial literacy on the success of their enterprise.

According to Dr. Y.P. Aggarwal (2008), descriptive research is devoted to the

gathering of information about prevailing conditions or situations for the purpose of

description and interpretation. This type of research method is not simply amassing and

tabulating facts but includes proper analyses, interpretation, comparing, identification of

trends and relationships.

Population, Sample Size, and Sampling Technique

From the population of 3,852 MSME Owners in Avenida, Sta. cruz, Manila, The

researchers computed the sample size using Slovin‘s formula and 0.5 as sampling error,

wherein 363 MSME Owners from the total population.

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 23

Slovin‟s Formula: n = N/1+N (e)2

Where: n= is the sample size

N= is the population size

e= is the margin of error

N = Population 3852 MSME

N = sample 362.7 or 363

% = percentage 50%

The researchers used simple random sampling as the sampling technique in

gathering data by selecting any members of the population that are covered in the study.

The respondents‘ enterprises were selected based on certain set of criteria that includes

the following information: (1) Selected MSME‟S located in Avenida, Sta. Cruz, Manila. (2)

Operating for at least 1 year or more. (3) Legally operating and registered in Department

of Trade and Industry.

Description of Respondents

The respondents of the study are MSME Owners engaging in different nature of

business. Located at Avenida, Sta. Cruz, Manila, Registered and legally operating for

at least 1 year or more.

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 24

Research Instrument

The researchers gathered the data needed through the use of survey questionnaires.

The content of the instrument was based on the information from the literature reviewed.

The questionnaire was divided into two (2) parts. The first part focused on the profile of the

respondents. The second part were concentrated on the assessment of Importance of

Financial Literacy in terms of Budgeting, Investing, Spending, Savings and acquiring loans

in Enterprise success. The instrument was structured in the Likert Scale questions model

considering five (5) options with the corresponding scale. The choices were Highly

Important (5); Slightly Important (4); Important (3); Either Important or Not Important (2);

and, Not Important at all (1). Respondents were instructed to check the box provided that

corresponds to their degree of agreement with the statements contained in the instrument.

Likert Scale

Degree of an Agreement of Respondent

Scale Range Verbally Interpretation

5 4.51 - 5.0 Highly Important

4 3.51 - 4.5 Slightly Important

3 2.51 - 3.5 Important

2 3.51 - 2.5 Neither Important nor

Not Important

1 1.0 - 1.5 Not Important at all

Data-Gathering Procedure

To accomplish the objectives of the study, the activities focused on two major

activities: data gathering and data analysis. The researchers went on different places in
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 25

Avenida, Sta. Cruz, Manila. The respondents were then asked permission to have their

participation to the survey being conducted. Those who agreed to answer the survey

questionnaires were given sufficient time to answer and assess themselves according to

the items being asked. The researchers designed the questionnaire in a way that it

would be answered and filled out easily. After the survey period, the researchers have

processed the collected data required for the study.

Statistical Treatment of Data

The data gathered through survey was based on the research problems. Data will be

analyzed and organized using the following statistical tools:

1. Weighted mean is a statistical tool similar to arithmetic mean (most common type of

average). It is used to settle the most common factors being affected by competition.

Weighted mean is calculated by multiplying each term by the number of times it

occurs summing the result and dividing this total to the total number of occurrence.

The formula for the mean weighted average is as follows:

Where: W – weighted mean

TWF – total weighted frequency

N – number of respondents.
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 26

2. Frequency and Percentage Distribution refers to the correspondence of a set of

frequencies with the set of categories, intervals, or values into which a statistical

population is classified:

Where :

P = Percentage

n = frequency

N = total number of results

,
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

CHAPTER 4

RESULTS AND DISCUSSION

This chapter contains the presentation, analysis, and interpretation of data

gathered, which were presented in order according to specific aspects previously

discussed in this study. It aims to show all the variables and the significant differences in

the respondents‘ assessment on the Importance of Financial Literacy on the success of an

enterprise.

I. Profile of the respondent

1.1 Age
Table 1

Frequency and Percent Distribution of the Respondents According to Age

Age Frequency Percent

18 – 30 years old 92 25.3
31 – 40 years old 134 36.9
41 – 50 years old 79 21.8
51 years old and above 58 16.0
TOTAL 363 100.0

As shown in Table 1, Out of total population of 363 in Selected area of Avenida, Sta.

Cruz Manila according to their age, 134 or 36.9% are age of 31-40 years old, 92 or 25.3%

are age of 18-30 years old, 79 or 21.8 are age of 21-50 years old and 58 or 16.0% from

the age of 51 years old and above. These results shows that many of the respondents are

between millennia‘s and generation X who owned and still manage the business in

Avenida, Sta. Cruz Manila.

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 28

1.2 Sex

Table 2

Frequency and Percent Distribution of the Respondents According to Sex

Sex Frequency Percent

Female 226 62.3
Male 137 37.7
TOTAL 363 100.0

In Table 2 shows the total population of 363 in Avenida, Sta. Cruz Manila of 363,

226 or 62.3% are female, while 137 or 37.7% are male. This result shows that many of the

respondents are women compare to men. Hanson (2015) stated ―women are using

entrepreneurship to change their lives and those of others and, in the process, are

changing the places where they live.‖ Being in the business field the researchers believe

that women can lead for the development of the economy of a country.

1.3 Educational Attainment

Table 3

Frequency and Percent Distribution of the Respondents

According to Educational Attainment

Educational Attainment Frequency Percent

High School Graduate 149 41.0
Vocational Graduate 105 29.0
College Graduate 109 30.0
TOTAL 363 100.0

Table 3 provide a critical introduction to the main approaches to measuring

education in social survey research, which include measuring years of education, using
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 29

categorical qualification based measures and scaling approaches also concluded by

making the recommendation that place careful thought into which educational measure

they select. It shows about 41% of the respondents were educated up to high school, 30%

is college graduate a person who has received a degree or diploma on completing a

course of study and the other 29% is vocational degree either career or trade-specific.

Educational attainment and management experience are associated with new venture

start-up, whereas being female, having worker experience, and having received social

benefits are linked to business takeover said Robert (2017). It can be concluded from the

Table above that by and large the respondents were progressive in education but they

were still far away from the higher education which is so important today to create a

knowledge based society.

1.4 Nature of Business

Table 4

Frequency and Percent Distribution of the Respondents According to Nature of Business

Nature of Business Frequency Percent

Service 121 33.3
Merchandising 125 34.5
Manufacturing 40 11.0
Online Business 25 6.9
Home Business 52 14.3
TOTAL 363 100.0

Table 4 shows that the 363 respondents of this study, 125 or 34.5 % have been

operate merchandising business, 121 or 33.3% have been operate service business, 52

or 14.3% have been operate home business, 40 or 11.0% in manufacturing business,

and 25 or 6.9% have operate online business. According to Zaefarian (2017) the
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 30

Companies need to manage business relationships successfully in order to stay

competitive, study shows that companies can improve their relationship performance

through leveraging the structure of their business relationships. However, relationship

structures must align with the company's business strategy and not only in the nature of

their business. The table above shows that a commercial enterprise dedicated to the

purchase of finished goods and their resale for a profit and enterprise that provides work

performed in an expert manner by an individual or team for the benefit of its customer is

more in brace in our society the number of owner of the business based on the needs and

wants of the people around them.

1.5 Years of Operation

Table 5

Frequency and Percent Distribution of the Respondents According to Years of Operation

Years of Operation Frequency Percent

1 - 5 years 182 50.1
6 - 10 years 87 24.0
11 - 20 years 79 21.8
21 - 40 years 15 4.1
TOTAL 363 100.0

As shown in Table 5, of the 363 respondents of this study, 182 or 50.1% have been

in operation from 1 to 5 years, 87 or 24.0% have been in operation from 6 to 10 years, 79

or 21.8% have been in operation from 11 to 20 years, and 15 or 4.1% have been in

operation from 21 to 40 years. These results may imply that most of the respondents are

new entrepreneurs who chose to take the risk of leaving the comfort and security of a

regular job for a more uncertain financial future.

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 31

According to Joseph (2019), few key reasons why people make the decision

to start a small business are: (1) to earn an unlimited income based on your own efforts

and the success or failure of the enterprise, (2) to make a living while pursuing something

for which you have a strong passion, (3) to turn your idea for a product or service that

meets an unfulfilled need in the marketplace into a business, (4) to leave the corporate

world and enter into a more flexible lifestyle which can allow you to spend more time with

family and friends, and (5) to be more creative and free to change your work processes if

you wish.

2.1 Investing

Table 6

Respondents’ Assessments on the Importance of Financial Literacy on the Success of an

Enterprise in Terms of Investing

Weighted Verbal
Investing Mean Interpretation
Endorsing new products to adapt in the constant
change in trend. 4.33 Very Important
Guaranteeing the future financial viability of the
business through investing. 4.23 Very Important
Investing in new technology for more efficient
production. 4.16 Important
Investing in proper marketing strategies 4.11 Important
Expand networks to increase potential clients. 4.16 Important
GRAND MEAN 4.20 Very Important

Table 6 reveals that the statement ―Endorsing new products to adapt in the constant

change in trend.‖ and ―Guaranteeing the future financial viability of the business through

investing‖ obtains the highest weighted mean of 4.33 and 4.23, verbally interpreted as

―Very Important.‖ This may suggest that the respondents think one of the best ways to

achieve their goals while maintaining or increasing profit levels is through Endorsing new
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 32

products to adapt in the constant change in trend and Guaranteeing the future financial

viability of the business through investing. According to Suttle (2019), ―Consumer tastes

are constantly changing. Therefore, small companies must constantly keep up with the

types of products and services customers want.‖ Sales are often strong during the

introduction and growth stages. However, sales for most companies in the industry

eventually slow when their products hit the maturity state. Hence, it becomes more difficult

to maintain sales growth.

The statement ―Investing in new technology for more efficient production‖ obtained

the third highest weighted mean of 4.16, followed by ―Expand networks to increase

potential clients.‖ with a weighted mean of 4.16, and lastly by ―Investing in proper

marketing strategies‖ with a weighted mean of 4.11.

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 33

2.2 Budgeting

Table 7

Respondents’ Assessments on the Importance of Financial Literacy on the Success of an

Enterprise in Terms of Budgeting

Weighted Verbal
Budgeting Mean Interpretation
Preparing your annual budget sharpens your Very
understanding of your goals. 4.37 Important
Providing budget structures that are useful in guiding
your company to the direction in which it is supposed to
be going. 4.18 Important
Using of budgeting process as a tool for deciding where
to allocate funds in various activities of your business. 4.12 Important
Using of budget as the basis for measuring employee
performance. 3.99 Important
Budgeting process gives you control over your finances
and it will empower you to achieve your financial goals
4.13 Important
while simultaneously and successfully confronting any
unforeseen events.
GRAND MEAN 4.16 Important

Table 7 reveals that the statement ―Preparing your annual budget sharpens your

understanding of your goals‖ obtained the highest weighted mean of 4.37, verbally

interpreted as ―Very Important.‖ This may suggest that the respondents think one of the

best ways to achieve their goals while maintaining or increasing profit levels is through

developing and using an annual budget. According to Mamalis (2017), ―the goals you build

into your budget are the goals that are easiest to reach. When prepared thoughtfully and

reviewed regularly, a budget provides the resources for making your goals a reality.‖

The statement ―Providing budget structures that are useful in guiding your company

to the direction in which it is supposed to be going‖ obtained the second highest weighted

mean of 4.18, followed by ―Budgeting process gives you control over your finances and it
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 34

will empower you to achieve your financial goals while simultaneously and successfully

confronting any unforeseen events‖ with a weighted mean of 4.13, then by ―Using of

budgeting process as a tool for deciding where to allocate funds in various activities of

your business‖ with a weighted mean of 4.12, and lastly by ―Using of budget as the basis

for measuring employee performance‖ with a weighted mean of 3.99.

2.3 Spending

Table 8

Respondents’ Assessments on the Importance of Financial Literacy on the Success of an

Enterprise in Terms of Spending

Weighted Verbal
Spending Mean Interpretation
Ensuring that you always have money for the things
necessary for your business.
4.51 Very Important
Proper utilization of resources. *
4.46 Very Important
Using spending strategy for making the most of your money
and reaching your financial goals.
4.32 Very Important
Choosing spending plan as a way of determining the most
appropriate methods and saving. 4.06 Important
Applying a spending plan as a way of determining the most
appropriate methods of saving.
4.13 Important

GRAND MEAN 4.30 Important

Table 8 reveals that the statement ―Ensuring that you always have money for the

things necessary for your business.‖ obtained the highest weighted mean of 4.51, verbally

interpreted as ―Very Important.‖ This may suggest that the respondents think one of the

best ways to achieve their goals while maintaining or increasing profit levels is through

Ensuring that the company has money to spend for the necessary things for business.

According to Smith (2019), for a business, ―availability of money to spend is essential to

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 35

not only avoid the possibility of bankruptcy, but also to take advantage of various

expansion and growth opportunities.

The statement ―Proper utilization of resources.‖ obtained the second highest weighted

mean of 4.46, followed by ―Using spending strategy for making the most of your money

and reaching your financial goals‖ with a weighted mean of 4.32, then by ―Choosing

spending plan as a way of determining the most appropriate methods and saving.‖ with a

weighted mean of 4.06, and lastly by ―Applying a spending plan as a way of determining

the most appropriate methods of saving‖ with a weighted mean of 4.13.

2.4 Savings

Table 9
Respondents’ Assessments on the Importance of Financial Literacy on the Success of an
Enterprise in Terms of Savings

Verbal
Saving Weighted Mean Interpretation
Saving money to become financially secured and
provide a safety net in case of emergency. 4.59 Very Important
Setting up sinking funds for improvements or repairs
of production equipment. 4.42 Very Important
Saving money to fund new products in the future.
4.31 Very Important
Allocating money in your savings account to pay your
loans/debt. 4.14 Important
Creating solid financial cushion to expand your options
for decisions that have major effect on your business.
4.18 Important
GRAND MEAN 4.33 Important

In table 9 shows the statement ―Saving money to become financially secured and

provide a safety net in case of emergency‖ obtained the highest weighted mean of 4.59,

verbally interpreted as ―Very Important‖. This result shows that it is essential to separate
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 36

the expenses and bills from saving account or emergency fund to be financial secured in

the future. According to Cummins, Haskell & Jenkins (2009) ―A person‘s ability to manage

his money is essential to being successful in life‖.

The statement ―Setting up sinking funds for improvements or repairs of production

equipment‖ obtained the second highest weighted mean of 4.42, verbally interpreted as

―Very Important‖ followed by ―Saving money to fund new products in the future.‖ With

weighted mean of 4.31, verbally interpreted as ―Very Important‖, then by ―Creating solid

financial cushion to expand your options for decisions that have major effect on your

business‖ with weighted mean of 4.18, verbally interpreted as ―Important‖ and lastly by

―Allocating money in your savings account to pay your loans/debt‖ with weighted mean of

4.14, verbally interpreted as ―Important‖.

2.5 Acquiring Loan

Table 10

Respondents’ Assessments on the Importance of Financial Literacy on the Success of an

Enterprise in Terms of Acquiring Loans

Weighted Verbal
Acquiring Loans
Mean Interpretation
Applying for loan to increase your working capital. 3.40 Important

Use loan to acquire new equipment 3.19 Slightly Important

Borrowing money for business expansion 3.03 Slightly Important

Taking out loans to cover unexpected expenses 2.91 Slightly Important

Using loans to purchase more inventory 2.94 Slightly Important

GRAND MEAN 3.10 Slightly Important

Table 10 the result shows the statement ―Applying for loan to increase your working

capital‖ obtained highest weighted mean of 3.40, verbally interpreted as ―Important‖. It

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 37

shows that applying for a working capital loan helps the business owners to pay business

bills according to Murray (2018) especially in start-up phase. This statement ―Use loan to

acquire new equipment‖ is weighted mean of 3.19, verbally interpreted as ―Slightly

Important‖ then by ―Using loans to purchase more inventory‖ with weighted mean of 2.94,

verbally interpreted as ―Slightly Important‖ and lastly by ―Taking out loans to cover

unexpected expenses‖ with weighted mean 2.91, verbally interpreted as ―Slightly

Important‖.

3. Significant difference according to their profile.

3.1 Age

Table 11

Significant Difference in the Respondents’ Assessments on the Importance of

Financial Literacy on the Success of an Enterprise When They are Grouped by Age

Financial p-
Literacy Age Mean F-value value Decision Remarks
18 – 30 4.3957
31 – 40 4.0030
Investing 5.888 .001 Reject Ho Significant
41 – 50 4.2911
51 and above 4.1897
18 – 30 4.1522
31 – 40 4.0478 Not
Budgeting 2.367 .071 Accept Ho
41 – 50 4.3013 Significant
51 and above 4.2276
18 – 30 4.2935
31 – 40 4.3060 Not
Spending .369 .776 Accept Ho
41 – 50 4.2380 Significant
51 and above 4.3552
18 – 30 4.4152
31 – 40 4.2552 Not
Saving 1.504 .213 Accept Ho
41 – 50 4.2937 Significant
51 and above 4.4103
18 – 30 3.3478
Getting 31 – 40 2.4761
23.279 .000 Reject Ho Significant
Loan 41 – 50 3.5266
51 and above 3.5414
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 38

It can be seen from table 11 that getting loan has f= 23.279 p = .000 and investing

has f= 5.88 p= .001 since the p value are less than the assume level of significant of 0.5,

the null hypothesis rejected. This means that when respondent are grouped according to

age their assessment on the importance of financial literacy in terms of getting loan and

budgeting is slightly statistically significant. However, their assessment on spending f=

2.571 with p= .078 and saving f= .562 p=.571 were statistically the same.

3.2 Sex

Table 12

Significant Difference in the Respondents’ Assessments on the Importance of Financial

Literacy on the Success of an Enterprise When They are Grouped by Sex

Financial
Literacy Sex Mean F-value p-value Decision Remarks
Female 4.1814
Investing -.448 .654 Accept Ho Not Significant
Male 4.2175
Female 4.1398
Budgeting -.631 .529 Accept Ho Not Significant
Male 4.1883
Female 4.2699
Spending -.963 .336 Accept Ho Not Significant
Male 4.3387
Female 4.2726
Saving -2.134 .034 Reject Ho Significant
Male 4.4219
Female 3.0938
Getting Loan -.042 .966 Accept Ho Not Significant
Male 3.0993

It can be seen in the table 12 that statistically says saving with the F= -2.134 P= -

0.34 is the most significant variable when the respondents are grouped according to sex.

A study shows that, Due to the difference in socialization of men and women during

childhood they are different in financial matters. Furthermore, the findings show that

financial knowledge was the first and strongest determinant of savings behavior among

male and female. Perry and Morris (2005) and Lusardi and Mitchell (2007) found that due
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 39

to the difference between financial knowledge that men have more financial knowledge

than women effect both saving and portfolio choices of women. However, other variable

assessment spending F= .963 p= .336, Budgeting F= 631 p= 529, investing F= 448 p

=.654 are less significant in terms of financial literacy when they grouped according to sex.

3.3 Educational Attainment

Table 13

Significant Difference in the Respondents’ Assessments on the Importance of Financial

Literacy on the Success of an Enterprise When They are Grouped by Educational Attainment

Financial Educational F- p-
Literacy Attainment Mean value value Decision Remarks
High School 3.9826
Investing Vocational 4.2895 11.494 .000 Reject Ho Significant
College 4.3945
High School 4.0121
Budgeting Vocational 4.2990 5.823 .003 Reject Ho Significant
College 4.2220
High School 4.2161
Not
Spending Vocational 4.2971 2.571 .078 Accept Ho
Significant
College 4.4037
High School 4.2872
Not
Saving Vocational 4.3448 .562 .571 Accept Ho
Significant
College 4.3706
High School 2.9758
Getting Not
Vocational 3.3124 2.595 .076 Accept Ho
Loan Significant
College 3.0514

Table 13 exhibits that Investing has F= 11.494 with p=.000 and Budgeting F=5.823

with p=. 003. Since the p-value is less than the level of significance which is 0.05;

therefore, we rejected the null hypothesis. This means that, when the respondents are

grouped according to educational attainment, their assessments on the importance of

financial literacy in investing and budgeting differ statistically significantly. According to

Kennon (2019), if investing is done properly it can typically make more money for you than
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 40

the interest you might earn, but with reward comes risk. If you make poor choices or even

if things beyond your control go wrong, you could lose that money. It might not be there for

you in case of an emergency.

3.4 Nature of Business

Table 14

Significant Difference in the Respondents’ Assessments on the Importance of Financial

Literacy on the Success of an Enterprise When They are Grouped by Nature of Business

Financial Nature of F-
Literacy Business Mean value p-value Decision Remarks
Service 4.0694
Merchandising 4.1040
Investing Manufacturing 4.4450 4.359 .002 Reject Ho Significant
Online Business 4.4960
Home Business 4.3692
Service 4.1107
Merchandising 4.0928
Not
Budgeting Manufacturing 4.4000 1.827 .123 Accept Ho
Significant
Online Business 4.1280
Home Business 4.2538
Service 4.3504
Merchandising 4.2144
Not
Spending Manufacturing 4.3900 2.084 .082 Accept Ho
Significant
Online Business 4.5280
Home Business 4.1808
Service 4.3554
Merchandising 4.2912
Not
Saving Manufacturing 4.5150 1.294 .272 Accept Ho
Significant
Online Business 4.2960
Home Business 4.2308
Service 3.0165
Merchandising 3.0624
Getting Loan Manufacturing 3.7500 6.077 .000 Reject Ho Significant
Online Business 2.3520
Home Business 3.2154
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 41

It can be seen from Table 14 that Getting Loan has an F=6.077 with p=.000 &
Investing has an F=4.359 with p=.002. Since the p-values are less than the
assumed level of significance of .05, the null hypotheses were rejected. This
means when the respondents are grouped according to nature of business, their
assessments on the importance of financial literacy in terms of getting loan &
investing differ statistically significantly. According to Sarath (2018), acquiring
loans and putting your loaned money in the project shows that you are willingly
taking the risk of putting the money that you have worked hard for at stake,
supporting your idea with the faith you have in your company. However, their
assessments on Spending (F=2.084, p=.082), Budgeting (F=1.827, p=.123) &
Savings (F=1.294, p=.272) were statistically the same.
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 42

3.5 Years of Operation

Table 15

Significant Difference in the Respondents’ Assessments on the Importance of Financial

Literacy on the Success of an Enterprise When They are Grouped by Years of Operation

Financial Years of
Literacy Operation Mean F-value p-value Decision Remarks
1-5 4.2385
6 - 10 4.1126
Investing .567 .637 Accept Ho Not Significant
11 - 20 4.1848
21 - 40 4.2000
1-5 4.0714
6 - 10 4.0989
Budgeting 4.313 .005 Reject Ho Significant
11 - 20 4.3823
21 - 40 4.3733
1-5 4.2330
6 - 10 4.3172
Spending 1.431 .234 Accept Ho Not Significant
11 - 20 4.3823
21 - 40 4.4800
1-5 4.3527
6 - 10 4.2529
Saving .597 .617 Accept Ho Not Significant
11 - 20 4.3392
21 - 40 4.4267
1-5 3.2473
Getting 6 - 10 2.8506
2.434 .065 Accept Ho Not Significant
Loan 11 - 20 3.0582
21 - 40 2.8800

Table 15 exhibits the response of the respondents if they are grouped by

years of operation. Based on the table, the respondents think that Budgeting (F=

4.313, p=.005) is highly important to sustain a business. Scranton (2018) stated "If

you don't budget and save accordingly, you'll be in a bad way [if or when] your

company takes a downturn or even has an off month, you have to account for slow

payments, and budgeting can help alleviate the financial burden you may feel while

waiting for a check to arrive‖. However, their assessment on Investing (F=.567,

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 43

p=.637), Spending (F= 1.431, p=.234), Savings (F=.597, p= .617andGetting Loans

(F=.2434, p=.065) were statistically the same.

3.4 Nature of Business

Table 14

Significant Difference in the Respondents’ Assessments on the Importance of

Financial Literacy on the Success of an Enterprise When They are Grouped by
Nature of Business

Financial Nature of F-
Literacy Business Mean value p-value Decision Remarks
Service 4.0694
Merchandising 4.1040
Investing Manufacturing 4.4450 4.359 .002 Reject Ho Significant
Online Business 4.4960
Home Business 4.3692
Service 4.1107
Merchandising 4.0928
Not
Budgeting Manufacturing 4.4000 1.827 .123 Accept Ho
Significant
Online Business 4.1280
Home Business 4.2538
Service 4.3504
Merchandising 4.2144
Not
Spending Manufacturing 4.3900 2.084 .082 Accept Ho
Significant
Online Business 4.5280
Home Business 4.1808
Service 4.3554
Merchandising 4.2912
Not
Saving Manufacturing 4.5150 1.294 .272 Accept Ho
Significant
Online Business 4.2960
Home Business 4.2308
Service 3.0165
Merchandising 3.0624
Getting Loan Manufacturing 3.7500 6.077 .000 Reject Ho Significant
Online Business 2.3520
Home Business 3.2154

It can be seen from Table 14 that Getting Loan has an F=6.077 with p=.000 &
Investing has an F=4.359 with p=.002. Since the p-values are less than the assumed level
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 44

of significance of .05, the null hypotheses were rejected. This means when the
respondents are grouped according to nature of business, their assessments on the
importance of financial literacy in terms of getting loan & investing differ statistically
significantly. However, their assessments on Spending (F=2.084, p=.082), Budgeting
(F=1.827, p=.123) & Savings (F=1.294, p=.272) were statistically the same.

3.5 Years of Operation

Table 15

Significant Difference in the Respondents’ Assessments on the Importance of

Financial Literacy on the Success of an Enterprise When They are Grouped by
Years of Operation

Financial Years of
Literacy Operation Mean F-value p-value Decision Remarks
1-5 4.2385
6 - 10 4.1126
Investing .567 .637 Accept Ho Not Significant
11 - 20 4.1848
21 - 40 4.2000
1-5 4.0714
6 - 10 4.0989
Budgeting 4.313 .005 Reject Ho Significant
11 - 20 4.3823
21 - 40 4.3733
1-5 4.2330
6 - 10 4.3172
Spending 1.431 .234 Accept Ho Not Significant
11 - 20 4.3823
21 - 40 4.4800
1-5 4.3527
6 - 10 4.2529
Saving .597 .617 Accept Ho Not Significant
11 - 20 4.3392
21 - 40 4.4267
1-5 3.2473
Getting 6 - 10 2.8506
2.434 .065 Accept Ho Not Significant
Loan 11 - 20 3.0582
21 - 40 2.8800

Table 15 exhibits the response of the respondents if they are grouped by years of

operation. Based on the table, the respondents think that Budgeting (F= 4.313, p=.005) is
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 45

highly important to sustain a business. Scranton (2018) stated "If you don't budget and

save accordingly, you'll be in a bad way [if or when] your company takes a downturn or

even has an off month, you have to account for slow payments, and budgeting can help

alleviate the financial burden you may feel while waiting for a check to arrive‖. However,

their assessment on Investing (F=.567, p=.637), Spending (F= 1.431, p=.234), Savings

(F=.597, p= .617andGetting Loans (F=.2434, p=.065) were statistically the same.

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

CHAPTER 5

SUMMARY OF FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

This chapter presents the findings of the study, presenting the Financial Literacy and

its Importance on the Enterprise Success in Avenida Sta, Mesa, Manila. Also, included in

the chapter are the researcher‘s conclusions and recommendation.

Specifically it sought to answer the following questions:

1. What is the profile of the respondents in terms of the following:

1.1 Age

1.2 Sex

1.3 Educational attainment

1.4 Nature of business

1.5 Years of operation

2. What is the Importance of Financial Literacy on the Success of an Enterprise to the

respondents in terms of:

2.1 Investing

2.2 Budgeting

2.3 Spending

2.4 Saving
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 47

3. Is there any significant difference in the perception of the respondents on the extent
of importance of the different aspects of financial literacy when they are grouped
according to profile?

Summary of Findings

The data gathered from the respondents were analyzed and the following findings are

created in accordance with the questions given under the statement of the problem.

In these findings, the researchers used the frequency (363 respondents) and the

computed mean. After the data has been interpreted, the significant findings of the study

are shown in the following pages.

1. Profile of the Respondents

Based on the result of the study the following findings are presented:

Most owners of the enterprise in Avenida, Sta. Cruz, Manila were 31-40 years old

had a percentage of 36.9 (134 respondents) wherein 51 and above had the lowest

percentage 16 %(58 respondents). The sex is mostly female had a percentage of 62.3 %

(226 respondents) wherein male had only 37.7 % ( 137 respondents).In terms of

educational attainment high school graduate had the higher percentage 41% ( 149

respondents) wherein vocational graduate had the lowest percentage 29 % (105

respondents). Their nature of business mostly a merchandising business 34.5% (125

respondents) wherein Online business have the lowest percentage of 6.9 % (25

respondents).Years of operation is 1-5 years in business and they‘re just beginning their

business and had a percentage of 50.1 (182 respondents) wherein 21 to 40 years& above

had the lowest percentage 4.1% (15 respondents).

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 48

2. Importance of Financial Literacy on the Success of an Enterprise to the

respondents in Avenida , Manila

In terms of Investing, most of the statement are marked ―Important‖ to their

business but the overall highest had a Weighted Mean of 4.33 wherein respondents says

that the statement ―Endorsing new product to adapt in the constant change in trend ‖ was

Very important and had an important role in the success of an enterprise.

In terms of Budgeting ,the majority of the statements were marked as ―Important‖

respondents said that ―Preparing your annual budget sharpens your understanding of your

goals‖ strongly affect the success of an enterprise which has 4.37 weighted mean verbally

interpreted as ―very important" and the overall weighted mean had 4.16 verbally

interpreted as ― Important‖ .

In terms of Spending, the majority of the respondents said that mostly of the

statement were Important to the success of an enterprise and the highest weighted mean

had 4.51 stated that ―Ensuring that you always have the money for the things necessary

for your business‖.

In terms of Savings, the overall weighted mean was 4.33 and it was verbally

interpreted as ―Important‖ respondents said that ―Saving money to became financially

secured and provide a safety net in case of emergency‖ is ―Very important‖ which had the

highest weighted mean 4.59.

However, in terms of getting loans the overall weighted mean was 3.10 and it was

verbally interpreted as ―slightly important‖. Respondents said that applying for loan to

increase your working capital is important which had the highest weighted mean 3.40.
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 49

3. Significant Difference in the Respondents' Assessments on the Importance of

financial literacy on the Success of an Enterprise When They are Grouped according

to Profile

As to their enterprise success most of respondents agreed that Financial literacy

have a huge impact to the success of enterprises. As the result of the Survey, the

researchers are able to find out that financial literacy in terms of saving, spending,

budgeting, investing, and getting loans have a standpoint important on the enterprise

success.

In terms of Respondents' Assessment on the Importance of Financial Literacy on the

Success of an Enterprise in Terms of Savings. The statement ―Savings money to become

financially secured and provide a safety net in case of emergency‖ obtained the highest

weighted mean of 4.59, verbally interpreted as ―Very Important‖ while

In terms of Respondents‘ Assessments on the Importance of Financial Literacy on

the Success of an Enterprise in terms of Getting Loans. The statement Applying for loan to

increase your working capital obtained highest weighted mean of 3.40, Important.

In terms of Significant Difference in the Respondents' Assessments on the

Importance of the Financial Literacy on the Success of an Enterprise When they are

Grouped by age, their assessment in terms of getting loan and budgeting is slightly

statistically significant.

In terms of Significant Difference in the Respondents Assessments on the

Importance of financial literacy on the Success of an Enterprise, statistically says saving

with the F=2.134 p=0.34 is the most significant variable when they are grouped according

to their age.
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 50

In terms of Significant Difference in the Respondents Assessments on the

Importance of financial literacy on the Success of an enterprise when they are grouped by

Educational Attainment, their assessments in investing and budgeting differ statistically

significant.

In terms of Significant Difference in the Respondents Assessments on the

Importance of financial literacy on the success of an Enterprise When they are grouped by

Nature of Business, their assessments in terms of getting loan and investing differ

significantly.

In terms of Significant Difference in the Respondents Assessments on the

Importance of financial literacy on the success of an Enterprise When they grouped by

Years of Operation, their assessments in terms of getting loan and investing differ

statistically significantly.

CONCLUSIONS

Based on the gathered findings, the researchers concluded the following:

1. That base on the finding the majority of the respondents were new in business

industry that exists 1 – 5 years. The researchers concluded that the age and

educational attainment were not a big factor for making a business. The study was

proven that the experience and knowledge of the person and making the best way for

the business is the key to become financial literate.

2. That base on the finding the respondents has the extent perception especially in

terms of investing, budgeting, spending and savings while some of them said that

Acquiring Loans is slightly important for their business. That is because they afraid to

be in debt and turns out in bankruptcy.

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 51

3. That the importance of financial literacy has significant difference to the respondent in

terms of investing, budgeting, spending, savings and acquiring loans.

RECOMMENDATIONS

The researchers offered the following recommendation based on the findings and

conclusions.

1. Respondents are mostly new; going to start up seminars is a good investment for

their business. Allowing you to gather more knowledge on how to sustain an enterprise is

a good heads up and taking notes from already established enterprise can allow them to

see success from different perspective.

2. In terms of acquiring loans, most respondents had problem with their acquired loans,

therefore it‘s highly recommended for enterprises to analyse and find a way to make their

loans efficient and effective, which they can do by analysing what are the most necessary

things to put on the money where you can get the best return of investment.

3. In terms of investing, invest in market research in each of their respective nature of

business. This allows them to have more options on what and how many products to

produce. This method also allows them to possibly increase their networks and attract

more customer. In terms of Budgeting, they must continuously improve and evaluate the

trend to discover its potential as the years of operations goes by. Being able to adapt to

changes is a key to maintain a business in the long run.