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Chapter 1

THE PROBLEM AND ITS BACKGROUND

Introduction

Cash is considered as the lifeblood of all business establishments,

whether small, medium or large in scale, it is the most vital asset which provides

the basis of its life. It should be managed efficiently to support the growth and

financial strength of the business, with sufficient cash a business has the ability

to buy almost any of the other resources.

Due to its vitality, cash management can be crucial and difficult up to a

point in which every decision can affect the business in a great degree. It is a key

component of ensuring a business’ stability and solvency. If at any time, a

business fails to pay an obligation when it’s due, the business is insolvent which

the primary reason why businesses go bankrupt. This is the reason why good

management of cash is required in running a business. Successfully managing

cash is an essential skill for small business developers because they typically

have less access to affordable credit and have significant amount of upfront

costs they need to manage while waiting for receivables. Cash management

involves a broad area of financing which includes the collection, handling, and

usage of cash. Wisely managing cash enables a business to meet unexpected

expenses in addition to handling regularly-occurring events.

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Cash management therefore, is a challenging and difficult task, due to the

fact that the life of the business hangs in the balance, which is why business

owners need to manage their cash efficiently; they also need keep track of every

movement of money received or spent, as well as the changes in their

environment.

We chose this matter as the subject for this study in order to gain more

knowledge on how to manage cash more effectively in order to help other people

who lack knowledge about cash management.

Successful cash management involves not only avoiding insolvency, but

also reducing days in account receivables, increasing collection rates, selecting

appropriate short term investment vehicles, and increasing days in cash on hand,

all in order to improve the business’ overall stability and financial profitability.

Background of the Study

Since the 1990s, there has been a resurgence of interest on the role of

small scale business enterprises in the Philippines, in national and international

economic and social development. Small scale businesses are vital to the

success of the economy. Not only as they provide the success stories of the

future, but also because they meet local needs (e.g. hairdresser, financial

consultant, and emergency plumber). This is consistent with the overall shift of

development strategies in many countries toward a more decentralized, even

localized, approach. As such, many scholars, practitioners, and institutions

involved in economic development have begun to recognize the important roles

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that smaller-scale business entities play in the economy and society. More and

more people are becoming convinced that these entities can be a very effective

means of achieving, not only economic progress, but social goals as well. All of

these suggest a greater need to increase our understanding of the nature and

capabilities of small scale businesses in their cash management practices as well

as the common problems that they encounter. Some of the common problems a

small scale business owner faces are miscalculations and wrong allocation of

cash resulting in shortages and failure to meet necessary obligations.

Literature Review

Babil (2012) cited that “cash management means the management of

liquidity in order to meet their day-to-day commitment”.

Tonen (2007) the researcher stated that “it is reasonable to expect that the

role of financial transactions in the cash management process in adding to firm

value has increased its importance and change the cash management behavior

of firms.”

Pandey (2007) “Cash is the important current asset for the operations of

the business which is the basic input needed to keep the business running on a

continuous basis: it is also the ultimate output expected to be realized by selling

the service or product manufactured by the firm. The firm should keep sufficient

cash, neither more nor less. Cash shortage will disrupt the firm's manufacturing

operations while excessive cash will simply remain idle without contributing
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anything towards the firm's profitability. Thus, a major function of the financial

manager is to maintain a Sound cash position.”

Isidro (2015) shared her views on the importance of cash. She stated that

“Cash flow is an essential ingredient to the survival of your small business. It is

the flow of money in and out of your small business, and the quantity as well as

timing of that flow is critical to the continued operation of your business.”

“Cash helps your business purchase items it needs to produce products

and services for profit, thereby helping your business to generate more cash for

its operation. If customers are slow to pay or your pricing structure does not

adequately cover the cost of production, your business will not have enough cash

to continue operation. Even if your business is turning in a profit, you can still be

forced to close if your business runs out of cash!”

Laudato (2013) stated that “cash management offers a great deal of

importance in operating business. The business will not survive if the finance

manager does not know how to handle cash effectively”.

She also mentioned in her study that “the cash management is the

planning, controlling and accounting of cash transactions and cash balances.

Because the cash move so readily between bank accounts and financial assets,

cash management really means the management of all the resources”.

According to Gitman (2006), “You need to understand the difference

between strategic and operating plans, and the role of each; the importance of
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focusing on the firm’s cash flows; and how use of pro forma statements can head

off trouble for the firm.

Tennet (2012) mentioned in his book, “of all the resources cash is

probably the most important. With sufficient cash a business has the ability to

buy almost any other resources in which it may be deficient”.

Richardson (2005) stated that “cash management is the movement of

funds through financial institutions to optimize liquidity. It is the management of

corporate funds to increase interest income earned by maximizing investments

and/or reducing interest paid by minimizing borrowings”.

He also mentioned that “cash management is a financial discipline that

uses the same principles, regardless of the type of business, size or age of an

enterprise”.

“Cash management is not an accounting function. The accountant records

and reports transactions historically; the cash manager plans and executes these

financial transactions. Cash managers use techniques, products and services to

efficiently manage cash resources and satisfactorily resolve cash shortages

surpluses”.

Morgan (2005) mentioned in his book that “cash is one of your most

important assets and should be managed efficiently to support your growth and

financial strength”.

Ward (2013) stated that “cash flow management is the process of

monitoring, analyzing, and adjusting their business’ cash flows”.

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According to the study conducted by Leung (2005), “cash plays a vital role

in a company’s operation. It is used to pay wages and salaries, trade debts,

taxes and dividends. It not only enables the company to promptly pay its

creditors and suppliers so as to foster good relations but also lets the company

take advantage of favorable business opportunities. Most importantly, it keeps

the company liquid and prevents it from insolvency or bankruptcy. He also

mentioned “the objectives of cash management: (a) to have sufficient cash for

operation in order to maintain liquidity; and (b) to invest excess cash for a return”.

“It was also mentioned that “cash is the most active item on the

accounting statements. The movement of cash completes almost all purchases

and sales transactions. Purchases of goods and services normally results in cash

payments; sales normally result in cash receipts. Cash more than any other

asset, is the item involved in business transactions. This is due to the nature of

the business transactions which include a price and condition calling for

settlement in terms of the medium of exchange.”

“In striking contrast to the activity of cash is its unproductive nature. Since

cash is the measure of value, it cannot expand or grow unless it is converted into

some other properties. Excessive cash balances of cash on hand are often

referred to as “idle cash”. Efficient cash management requires that available cash

be continuously working in one of several ways – for example, as part of the

operating cycle or as a short term or long term investment because of the high

value of money in relation to its mass, it’s easy transferability, and other obvious

characteristics, it is the asset most susceptible to improper diversion and used by

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employees. In addition, a great many transactions either directly or indirectly

affect its receipt or payment. It is therefore essential that cash be effectively

safeguarded by the special controls.”

Waltson et al (2007), explained that cash management as the concept

which is concerned with optimizing the amount of cash available, maximizing the

interest earned by spare funds not required immediately and reducing losses

caused by delays in the transmission of funds.

According to Davidson et al, (2005), “cash is any medium of exchange,

which is immediately negotiable. It must be free of restriction for any business

purpose. Cash has to meet the prime requirements of general acceptability and

availability for instant use in purchasing and payment of debt. Acceptability to a

bank for deposit is a common test applied to cash items. This is a process of

Planning, controlling, and accounting for cash transactions and cash balances. It

is channeling available cash into expenditures that enhance productivity, directly

or indirectly”.

Team FME (2013) cited in their book that “management of cash flow is

one part of a larger management responsibility known as the management of

working capital, which refers to the operating liquidity available to an

organization”.

According to Zimmerer et al (2008) “cash management is the process of

forecasting, collecting, disbursing, investing, and planning for cash a company

needs to operate smoothly. They further added that cash management is a vital
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task because it is the most important yet least productive asset that a small

business owns. A business must have enough cash to meet its obligations or it

will be declared bankrupt. Creditors, employees and lenders expect to be paid on

time and cash is the required medium of exchange, however, some firms retain

an excessive amount of cash to meet any unexpected circumstances that might

arise. These dormant cash have an income-earning potential that owners are

ignoring and this restricts a firm’s growth and lowers its profitability. Investing

cash, even for a short time, can add to company’s earning. Proper cash

management permits the owner to adequately meet cash demands of the

business, avoid retaining unnecessarily large cash balances and stretch the profit

generating power of each dollar the business owns”.

Cash management is particularly important for new and growing

businesses. Davidson et al, (2005) indicated in their book that “cash flow can be

a problem even when a small business has numerous clients, offers a superior

product to its customers, and enjoys a sterling reputation in its industry.

Companies suffering from cash flow problems have no margin of safety in case

of unanticipated expenses. They also may experience trouble in finding the funds

for innovation or expansion. Finally, poor cash flow makes it difficult to hire and

retain good employees”.

“Cash management has four major functions; determination of minimum

cash balances, effective borrowing, advantageous investment of excess cash,

and acceleration of cash flow”.

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“The minimum cash balance is established by taking into consideration the

basic safety cushion needed, minimum bank balance requirements, and the rate

of daily cash collections and disbursements. Cash balances should be

maintained at the lowest practical minimum because excess cash earns nothing

and loses purchasing power in period of rising prices”.

Hofstrand, (2013) said that “cash flow statement is one of the most

important financial statements for a project or business. The statement can be as

simple as a one page analysis or may involve several schedules that feed

information into a central statement. It is a listing of the flows of cash into and out

of the business or project.”

Sardakis (2007) stated that “it is very important to have efficient and

effective liquidity management for the survival of the business, especially for

smaller ones”.

Westerfield et al, (2007) noted that “it is important to distinguish between

true cash management and a more general subject of liquidity management. The

distinction is a source of confusion because the word cash is used in practice in

two different ways”.

“First, it has its literal meanings, actual cash on hand. However, financial

managers frequently use the word to describe a firm's holdings of cash along

with its marketable securities, and marketable securities are sometimes called

cash equivalents or near cash. In our distinction between liquidity management

and cash management is straightforward, they added”.

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Woodward et al, (2007) “Cash flow accounting involves the reporting of

classified list of last year’s cash flows, and a set of forecast cash flows, with

supporting analysis of the variances between last year’s actual and forecast cash

flows. It therefore emphasizes the most fundamental events in business

activities, cash flows into and out of the firm, and the segregation of past (cash)

facts from future estimates, accounting time period allocation, based on

estimates of consumption are avoided”.

Kasilo, (2005) “Cash flows from operations are the amount of cash a firm

generates in a measured time from its operation. Various methods are used to

determine the amount of operating cash flow. The prevalent methods use the

income statement and the balance sheet to prepare the cash flow statement

(also called statement of sources and application of funds)”.

Hampton (2006) stated that cash is the money which a firm can disburse

immediately without any restriction. The term cash includes coins, currency and

checks held by the firm, and balances in its bank accounts. Sometimes near-

cash items, such as marketable securities or bank time’s deposits, are also

included in cash. The basic characteristic of near-cash assets is that they can

readily be converted into cash. Generally, when a firm has excess cash, it invests

it in marketable securities. This kind of investment contributes some profit to the

firm.
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Theoretical Framework

In financial theory, researchers will be interested in how cash and other

liquid assets affect firm value and the optimal capital structure of a firm. Cash

management is expected to play a key role in creating stockholder value. That is

why it is important to find new evidence of cash management behavioral

dimensions that cause the creation or destruction of shareholder value. Morris

(1983) integrated operating cash flow activities into the risk and return

framework. In this statement, the cash management policy of the firm will

assume to be of the Miller and Orr type. Sartoris and Hill (1983) integrated short-

run cash inflows and outflows into the net present value model. They have

showed that the changes in cash management policies have a direct effect on

the value of the firm.

The Miller and Orr model of cash management is one of the various cash

management models in operation. It is an important cash management model as

well. It helps the present day companies to manage their cash while taking into

consideration the fluctuations in daily cash flow.

As per the Miller and Orr model of cash management the companies let

their cash balance move within two limits - the upper limit and the lower limit. The

companies buy or sell the marketable securities only if the cash balance is equal

to any one of these.

When the cash balances of a company touches the upper limit it purchases a

certain number of saleable securities that helps them to come back to the desired
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level. If the cash balance of the company reaches the lower level then the

company trades its saleable securities and gathers enough cash to fix the

problem.

It is normally assumed in such cases that the average value of the

distribution of net cash flows is zero. It is also understood that the distribution of

net cash flows has a standard deviation. The Miller and Orr model of cash

management also assumes that distribution of cash flows is normal.

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Conceptual Framework

The conceptual framework showed the scope and direction of the study.

The paradigm consisted of two frames which showed the independent variable in

the left, which is the business profile of the respondents, and the second one in

the right showed the dependent variable, cash management in selected small

scale business establishments in Pangil, Laguna. The lines connecting the two

frames showed the relationships that exist among variables.

Independent Variable Dependent Variable

 Common problems  Levels of cash

encountered in cash management practices in
management selected small scale
business establishments
in Pangil, Laguna in term
of:
 Forecasting
 Receiving
 Disbursing
 Controlling
 Investing

Figure 1. The conceptual paradigm showing the interplay of the variables of

the study.
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Statement of the Problem

The study was conducted to investigate all aspects of cash management

practices of selected small scale businesses in Pangil, Laguna.

Specifically, this study aimed to answer the following questions:

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

 Form of Business
 Nature of the Business
 Years of Existence
 Average Monthly Profit
 Starting Capital
2. What are the common problems encountered by small scale businesses in

cash management?
3. What are the levels of cash management practices in term of :
a. Forecasting
b. Receiving
c. Disbursing
d. Controlling
e. Investing
4. Is there a significant relationship between the common problems encountered

and the levels of cash management practices?

Research Hypothesis

H0 There is no significant relationship between the common problems

encountered and the levels of cash management practices.

Significance of the Study

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The study tried to determine the methods used by business owners in

handling cash that could be of great help in running a business more efficiently

and effectively.

As to Teachers. To provide additional information about the importance of

cash management and how it affects the business that they can apply in their

everyday lives.

As to the Community. To help them realize the importance as well as the

effects of wisely managing cash in their day-to-day lives.

As to Students. To help them to become more aware of the importance of

currency, to make them realize and appreciate the value of handling cash

efficiently that could be of great help in shaping their future.

As to Future Researchers. This study can be the basis for future

research works and may be a source for related literature.

As to the School. The Laguna Maritime Arts and Business Colleges can

use the results and recommendations to improve the curriculum for the Business

Administration Department.

Scope and Limitation of the Study

The study was limited only to the registered small scale businesses

located in Pangil, Laguna. The study was conducted in the year from 2015 up to

2016. The researchers utilized descriptive research.

Definition of Terms
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To have better understanding of the texts which were used in this study,

the researchers defined the following terms:

Cash. refers to money in the form of coins and bills as distinct from money

orders or credit.

Cash Management. refers to the way in which a person or organization

manages money.

Small Scale businesses. refers to businesses in Pangil, Laguna with less

than 500 employees and had a starting capital of not more than 5 million pesos.

Forecasting. refers to the prediction of future developments, an

estimation of what is likely to happen in the future, especially in cash

management for the selected small scale business establishments in Pangil,

Laguna.

Receiving. refers to the acquisition of cash by the selected small scale

business establishments in Pangil, Laguna.

Disbursing. refers to the paying out of money of the selected small scale

business establishments in Pangil, Laguna.

Controlling. The act of managing cash by the selected small scale

business establishments in Pangil, Laguna.

Investing. The act of using cash in order to buy something, especially one

that will be used by the business for a long time.

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 Chapter 2

RESEARCH DESIGN AND METHODOLOGY

This chapter presented the research design, research procedure,

respondents of the study, sampling techniques, research instruments, and

statistical tools that were used in the study.

Research Design

The researchers employed descriptive method of research in describing

and presenting the results of this study entitled “Cash Management practices of

selected small scale business establishments in Pangil, Laguna”.

The descriptive method included techniques that were used to summarize and

describe numerical data for the purpose of easier interpretation (Kazmier, 2004).

Respondents of the Study

The respondents of the study were the registered business establishments

that were classified as micro to small scale in selected areas in Pangil, Laguna.

The researchers chose a total of 10 respondents for the investigation.

Sampling Techniques

Quota sampling was chosen as the sampling technique. This sampling

technique is useful when time is limited, a sampling frame is not available, the

research budget is very tight or when detailed accuracy is not important.

Gantt chart

Academic Year 2015-2016

Activity Description
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Gathering data for

1
chapters 1 & 2

Construction of the
2
literature review

Construction of the
4
questionnaire

5 Colloquium

Distribution of
6
questionnaires

Analysis and
7
interpretation of data.

Final checking and

8
editing

9 Final Defense

Figure 2 below showed the Gantt chart of the study. The preparation for the

study lasted for ten (10) months which started from gathering the necessary data

for the construction of chapters 1 and 2 up to final defense.

Figure 2. Gantt chart of the study.

Budgetary Requirements
 The table below showed the budgetary requirements of the researchers

while conducting the research. The required amount was P 800.00 and it was

allocated for transportation expenses, computer rentals for research and editing,

for printing and photocopying of questionnaire and hard copies of the research

and expenses for documentation.

The budgetary requirements of the study

Expenses Estimated cost

Transportation P 100.00

Computer rentals P 350.00

Printing and photocopying P 250.00

Other expenses P 100.00

Total P 800.00

Data Gathering Procedures

Participants were informed about the nature and purpose of the study and

the confidentiality and non-trace-ability from the questionnaire response.

Participants were asked to answer the questions and give their opinions as

frankly as they could as it was crucial to the meeting of success of the study.

Once the questionnaires have been completed and collected, the researchers

had gone through the data and analyzed the information received.

Research Instruments
 The questionnaire was divided into functional areas as follows: Part I

contained the business profile of the respondents in term of the form and nature

of their business, the years of the business’ existence, average monthly profit

and the starting capital. Part II contained the common problems encountered and

part III contained statement about the levels of cash management practices in

term of forecasting, receiving, disbursing, controlling and investing.

Scale Range Interval Verbal Interpretation

5 4.51 – 5.00 Always

4 3.51 – 4.50 Oftentimes
3 2.51 – 3.50 Sometimes
2 1.51 – 2.50 Seldom
1 1.00 - 1.50 Never

Statistical Tools

The data that were gathered in this study were treated statistically. Varied

statistical tools were employed for the resulting data in different parts of this

research instrument. The researchers utilized percentage, weighted mean, and

chi-square to treat the following variables.

STATISTICAL TOOLS

Variable Statistical Tools

1. Demographic profile of the Frequency, Percentage, Rank

business
Weighted mean, Rank
 2. Common problems encountered
3. Levels of cash management

practices in term of:

a. Forecasting

b. Receiving

c. Disbursing

d. Controlling

e. Investing
Weighted mean, Rank

4. Relationship between the common

problems encountered and the levels of

Chi-Square
cash management practices
 Chapter 3

PRESENTATION, ANALYSIS, AND INTERPRETATION OF DATA

This chapter presents, analyzes, and interprets the data gathered to

determine the relationship between the common problems encountered and the

levels of cash management practices.

The findings are presented in the same order as outlined in the statement

of the problem discussed in chapter 1.

1. Business Profile of the Respondents

All the respondents in this study are categorized into micro to small scale

business. Their business profiles are explained further in this study.

Table 1: Form of Business

Form of business Frequency Percentage Rank

Sole Proprietorship 9 90% 1

Partnership 1 10% 2

Total 10 100% -
 Table 1 shows the form of the business of the respondents. Ninety per

cent of the respondents, with a frequency of nine, and ranked as first, were

engaged in sole proprietorship and only ten per cent, with a frequency of one,

which was ranked as second, was engaged in partnership. Sole proprietorship

form of business was more common among the respondents.

Table 2: Nature of the Business

Nature of the
Frequency Percentage Rank
business

Retailing 4 40% 2

Manufacturing 1 10% 3

Service 5 50% 1

Total 10 100% -

Table 2 shows the nature of the business of the respondents. Fifty per

cent of the respondents, with a frequency of five, and ranked as first, were

engaged in service, forty per cent, with a frequency of four, which was ranked as

second, were engaged in retailing and only ten per cent, with a frequency of one,

and ranked as third, was engaged in manufacturing. Most of the respondents

were engaged in service.

Table 3: Years in existence

Years in existence Frequency Percentage Rank

less than 5 3 30% 2

5 - 10 years 5 50% 1
 11 - 20 years 1 10% 3.5

21 and above 1 10% 3.5

Total 10 100% -

Table 3 shows the length of time the business of the respondents has

existed. Fifty per cent of the respondents, with a frequency of five, and ranked

as first, have been in business for 5 - 10 years, thirty per cent of the

respondents, with a frequency of three, and ranked as second, have been

operating for less than 5 years, ten per cent have been existing for 11 - 20 years

and another ten per cent are operating for more than 21 years, both with a

frequency of one and ranked as last. Most of the respondents have been in

business for 5 - 10 years.

Table 4: Average monthly profit

Average Monthly
Frequency Percentage Rank
Profit

Less than P 10,000 3 30% 2

P 10,001 - 25,000 5 50% 1

P 25,001 - 40,000 1 10% 3.5

P 55,001 and above 1 10% 3.5

Total 10 100% -

Table 4 shows the average monthly profit of the respondents. Five of the

respondents, with the percentage of fifty, ranked as one, have a monthly profit
between P 10,000 - 25,000. Three of the respondents, with the percentage of

thirty and ranked as second, have a monthly profit of less than P 10,000. One of

the respondents, with the percentage of ten, has a monthly profit between P

25,000 - 40,000, another ten per cent of the respondents, with a frequency of

one, has a monthly profit of P 55,001 and above. Both are ranked as last.

Table 5: Starting capital

Starting capital Frequency Percentage Rank

Less than P 50,000 9 90% 1

P50,001 - 500,000 1 10% 2

Total 10 100% -

Table 5 shows the amount of starting capital of each respondent. Ninety

per cent of the respondents, with a frequency of nine, had a staring capital of less

than 50,000 and only ten per cent of the respondents, with a frequency of one,

had a starting capital between P50,001 - 500,000.

2. Common problems encountered in cash management

Common problems Weighted

Verbal Interpretation Rank
encountered Mean

Not enough cash for emergency

2.3 Seldom 4
expenses

Miscalculations 1.7 Seldom 8.5

Wrong allocation of cash 1.7 Seldom 8.5

Not enough cash for necessary

2 Seldom 6.5
obligations

Cash overages 2.5 Sometimes 2

Cash shortages 2.4 Seldom 3

Not enough cash to buy

2 Seldom 6.5
necessary equipment.

Poor decisions in handling cash. 2.9 Sometimes 1

Huge overhead costs 2.1 Seldom 5

Problems in collecting receivables 2 Seldom 6.5

Average weighted mean 2.16 Seldom

Table 6: Common problems encountered in cash management

 Table 6 presents the common problems that the respondents encountered

when managing their cash. With a weighted mean of “2.9”, and ranked as first,

the most common problem that the respondents encounter when managing their

cash was having poor decisions. With a weighted mean of “1.7”, the respondents

least encounter having miscalculations and wrong allocations of cash, both are

ranked as last.

3. Cash management practices

Table 7: Cash management practices in term of Forecasting

Weighted Verbal
Forecasting Rank
Mean Interpretation

Experiencing poor decisions in

2.9 Sometimes 3
handling cash.

Experiencing unexpected
3.2 Sometimes 2
expenses.

Have enough cash allocated

for emergency and unexpected 3.5 Sometimes 1
expenses.

Have no cash allocated for

emergency and unexpected 2.3 Seldom 4
expenses.

Experiencing miscalculations
1.7 Seldom 5
and wrong allocation of cash.

Average weighted mean 2.72 Sometimes

 Table 7 presents the levels of cash management practices of the

respondents in term of forecasting. With a weighted mean of “3.5” and ranked as

first, the respondents sometimes have enough cash allocated for emergency and

unexpected expenses. With a weighted mean of “1.7” and ranked as last, the

respondents seldom experiences miscalculations and wrong allocation of cash.

Table 8: Cash management practices in term of Receiving

Weighted Verbal
Receiving Rank
Mean Interpretation

Double checks the amount

4.7 Always 1
received.

Issues receipts upon receiving

2.9 Sometimes 5
cash.

Promptly checks if the amount in

3.4 Sometimes 4
the receipt is correct.

Records the cash received

immediately in the financial 3.7 Oftentimes 3
system.

Puts the cash immediately in

different drawers to establish 3.9 Oftentimes 2
accountability.

Average weighted mean 3.72 Oftentimes

Table 8 shows the levels of cash management practices of the

respondents in term of receiving cash. With a weighted mean of “4.7” and ranked

as first, the respondents always double check the amount that they receive. On
the other hand, with a weighted mean of “2.9” and ranked as last, the

respondents only issues receipts upon receiving cash occasionally.

Table 9 : Cash management practices in term of Disbursing

Weighted Verbal
Disbursing Rank
Mean Interpretation

Pays bills and other utilities before

due to avoid any penalties, 4.5 Oftentimes 1.5
interests, or other charges.

Pays loans, notes, and other short

or long term borrowings before
4.5 Oftentimes 1.5
due to avoid any penalties and
other interests.

Issues loans, notes and other

3 Sometimes 3
short or long term borrowings.

Have enough cash to meet

4 Oftentimes 2
obligations.

Have not enough cash to meet

2.1 Seldom 4
obligations.

Average weighted mean 3.62 Oftentimes

Table 9 shows the levels of cash management practices by the

respondents in term of disbursing cash. With same weighted mean of “4.5” and

both ranked as first, the respondents often pay their bills and other utilities, as

well as their notes and other short or long term loans to avoid any interests or
penalties. However, with a weighted mean of “2.1”, the respondents seldom

experiences having not enough cash to meet their necessary obligations.

Table 10: Cash management practices in term of Controlling

Weighted Verbal
CM Practices : Controlling Rank
Mean Interpretation

The owner withdraws its capital

2 Seldom 5
for personal use.

Provides separate cash drawers

4 Oftentimes 3
to establish accountability.

Records cash overages in the

4.2 Oftentimes 2
financial system.

Records cash shortages in the

3.4 Sometimes 4
financial system.

Records daily cash

4.6 Always 1
disbursements.

Average weighted mean 3.64 Oftentimes

Table 10 shows the levels of cash management practices by the

respondents in term of controlling. With a weighted mean of “4.6” and ranked as

first, the respondents always record their daily cash disbursements. On the other

hand, with a weighted mean of “2” and being last in the ranking, the respondents

seldom withdraw the business’ capital for personal use.

Table 11 : Cash management practices in term of Investing

Weighted Verbal
CM Practices : Investing Rank
Mean Interpretation

Spends cash for the repair and

3.8 Oftentimes 3
maintenance of certain equipment.

Invests on new equipment for the

3.6 Oftentimes 4
business.

Saves cash for possible expansion

4.4 Oftentimes 1
of the business.

Invests cash for business

4.2 Oftentimes 2
expansion.

The owner uses the cash to buy

2.6 Sometimes 5
his/her personal needs/wants.

Average weighted mean 3.72 Oftentimes

Table 11 shows the levels of cash management practices of the

respondents in term of investing. With a weighted mean of “4.4”, and ranked as

first, the respondents often save cash for the possibility of expanding their

business. However, with a weighted mean of “2.6”, and ranked as last, the

respondents sometimes uses the cash to buy their personal needs and/or wants.
4. Test of significant relationship between the common problems

encountered and the levels of cash management practices

Table 12: Significant Relationship Between the Common Problems

encountered and Levels of Cash Management Practices in term of

Forecasting

Level of Critical Verbal

Variable df X2 2 Decision
Significance Value of x Interpretation

F1 40 0.05 43.099 55.758 Accept H0 Not Significant

F2 40 0.05 46.808 55.758 Accept H0 Not Significant

F3 40 0.05 54.177 55.758 Accept H0 Not Significant

F4 40 0.05 40.311 55.758 Accept H0 Not Significant

F5 40 0.05 43.003 55.758 Accept H0 Not Significant

Table 12 shows the test of significance between the common problems

encountered and the levels of cash management practices in term of forecasting.

F1, F2, F3, F4 and F5 represent the five cash management practices under

forecasting. The result of the computed chi square in all practices of forecasting

was lower than the critical value of chi square, which was 55.758, which means

that the decision is to accept the null hypothesis. The common problems
 encountered have no significant relationship with the levels of cash management

practices in term of forecasting.

Table 13: Significant Relationship Between the Common Problems

encountered and the Levels of Cash Management Practices in term of

Receiving

Level of Critical Verbal

Variable df X2 Decision
Significance Value of x2 Interpretation
Table
R1 40 0.05 113.748 55.758 Reject H0 Significant
13
R2 40 0.05 55.379 55.758 Accept H0 Not Significant
shows
R3 40 0.05 84.372 55.758 Reject H0 Significant
the test
R4 40 0.05 69.539 55.758 Reject H0 Significant
of
R5 40 0.05 81.161 55.758 Reject H0 Significant

significance between the common problems encountered and the levels of cash

management practices in term of receiving. R1, R2, R3, R4 and R5 represent the

five cash management practices of receiving. The result of the test of

significance shows that the computed chi square for R1, R3, R4 and R5 was

higher than the critical value of chi square which was 55.758. R1, R3, R4, and R5

have a significant relationship with the common problems encountered in cash

management. However, the result of the computed chi square for R2 was lower

than the critical value of chi square which means that the decision for R2 is to

accept the null hypothesis. R2 has no significant relationship with the common

problems encountered in cash management.

Table 14: Significant Relationship Between the Common Problems

encountered and the Levels of Cash Management Practices in term of

Disbursing

Level of Critical Verbal

Variable df X2 2 Decision
Significance Value of x Interpretation

D1 40 0.05 101.773 55.758 Reject H0 Significant

D2 40 0.05 93.081 55.758 Reject H0 Significant

D3 40 0.05 51.819 55.758 Accept H0 Not Significant

D4 40 0.05 66.524 55.758 Reject H0 Significant

D5 40 0.05 45.155 55.758 Accept H0 Not Significant

Table 14 shows the test of significance between the common problems

encountered and the levels of cash management practices in term of disbursing.

D1, D2, D3, D4 and D5 represent the five disbursing practices. The result of the

test of significance shows that the result of the computed chi square for D1, D2,

and D4 are higher than the critical value of chi square, which was 55.758, which

means that D1, D2, and D4 have a significant relationship with the common

problems encountered. On the other hand, the result of the computed chi square

for D3 and D5 was lower than the critical value of chi square which means that

D3 and D5 have no significant relationship with the common problems

encountered in cash management.

Table 15: Significant Relationship Between the Common Problems

encountered and the Levels of Cash Management in term of Controlling

Level of Critical Verbal

Variable df X2 2 Decision
Significance Value of x Interpretation

C1 40 0.05 42.043 55.758 Accept H0 Not Significant

C2 40 0.05 66.524 55.758 Reject H0 Significant

C3 40 0.05 76.003 55.758 Reject H0 Significant

C4 40 0.05 53.982 55.758 Accept H0 Not Significant

C5 40 0.05 93.184 55.758 Reject H0 Significant

Table 15 shows the test of significance between the common problems

encountered and the levels of cash management practices in term of controlling.

C1, C2, C3, C4 and C5 represent the five common practices of controlling. The

result of the test of significance shows that the computed chi square for C2, C3

and C5 was higher than the critical value of chi square which was 55.758 and

therefore verbally interpreted as reject the null hypothesis, C2, C3, and C5 have

a significant relationship with the common problems encountered in cash

management. On the other hand, the result of the computed chi square for C1

and C4 are lower than the critical value of chi square and therefore verbally

interpreted as accept the null hypothesis. C1 and C4 have no significant

relationship with the common problems encountered in cash management.

Table 16: Significant Relationship Between the Common Problems

Encountered and the Levels of Cash Management Practices in term of

Investing

Level of Critical Verbal

Variable df X2 2 Decision
Significance Value of x Interpretation

I1 40 0.05 58.867 55.758 Reject H0 Significant

I2 40 0.05 56.025 55.758 Reject H0 Significant

I3 40 0.05 93.796 55.758 Reject H0 Significant

I4 40 0.05 73.891 55.758 Reject H0 Significant

I5 40 0.05 47.431 55.758 Accept H0 Not Significant

Table 16 shows the test of significance between the common problems

encountered and the levels of cash management practices in term of investing.

I1, I2, I3, I4 and I5 represent the five common practices under investing. The

result of the test of significance shows that the computed chi square of I1, I2, I3

and I4 has exceeded the critical value of chi square which was 55.758, which

means that is it significant. I1, I2, I3 and I4 have significant relationship with the

common problems encountered in cash management. However, the computed

chi square of I5 did not exceed the critical value and therefore is not significant.

I5 has no significant relationship with the common problems encountered in cash

management.
 Chapter 4

SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS

This chapter presents the summary of findings, conclusions drawn, and

the recommendations given by the researchers.

Summary of findings

The following were the summary of findings:

1. Business profile of the Respondents

a) Form of business

Nine out of ten respondents were sole proprietorship and only one was

a partnership, the former was the more common form of business ownership

in selected areas in Pangil, Laguna.

b) Nature of the business

Five of the respondents were engaged in service, four were retailers

and only one was engaged in manufacturing. Most of the respondents were

engaged in service; some of the them were computer shops, and small

eateries. Most of the respondents that were engaged in retailing owned sari-

sari store. The respondent that was engaged in manufacturing owned a

bakeshop.
 c) Years in existence

Five of the respondents have been in business for 5 to 10 years, three

are in less than 5, one has been in business for 11 to 20 and one is more

than 21 years.

d) Starting capital

Nine out of the ten respondents had a starting capital of less than

P500,000, only one of the respondents had a starting capital within the range

of P500,001 up to P1,000,000.

e) Average monthly profit

Five of the ten respondents had an average monthly profit within the

range of P10,001 up to P25,000, three had less than P10,000, one had an

average monthly profit within the range of P25,001 up to P40,000, and one

respondent had an average monthly profit of more than P55,000.

2. Common problems encountered

The respondents encountered cash management problems like having

cash overages and poor decisions in handling cash occasionally. Other problems

like having not enough cash for emergency expenses and necessary obligations,

miscalculations and wrong allocations of cash, cash shortages, huge overhead

costs, and problems collecting receivables were seldom experienced by the

respondents.
3. Cash management practices

a) Cash management in terms of Forecasting

The result of the investigation stated that the average weighted mean

for cash management practices in term of forecasting was “2.72”, which

means that most of the cash management practices in forecasting were done

by the respondents occasionally.

b) Cash management in terms of Receiving

The result of the investigation showed that the average weighted mean

for cash management practices in term of receiving was “3.72”, which means

that the respondents often do most of the cash management practices when

receiving cash, and the respondents always double check the amount they

received.

c) Cash management in terms of Disbursing

The result of the study for the cash management practices in term of

disbursing had an average weighted mean of “3.62”, which means that the

respondents often do most of the cash management practices when

disbursing cash.

d) Cash management in terms of Controlling

The result of the study for the cash management practices in term of

controlling had an average weighted mean of “3.64”, which means that the
 respondents often do most of the cash management practices in controlling

their cash, and they always record their daily cash disbursements.

e) Cash management in terms of Investing

The result of the study for the cash management practices in term of

investing had an average weighted mean of “3.72”, which means that the

respondents often do most of the cash management practices when

investing cash. However, they only use their cash to buy their personal needs

and/or wants occasionally.

4. Significant relationship between the common problems encountered

and the levels of cash management practices

The statistical tool that was used for testing the significant relationship

between the common problems encountered and the levels of cash management

practices was chi-square. The test aimed to determine if there was a relationship

between the common problems encountered and the levels of cash management

practices in selected small scale business establishments in Pangil, Laguna.

In terms of forecasting, the computed chi square for all practices was

lower than the critical value which means that the common problems

encountered have no significant relationship with the levels of cash management

practices in term of forecasting.

In terms of receiving, the result of the test of significance that was

made in the second practice was not significant; the second cash management

practice in terms of receiving had no significant relationship with the common

problems encountered. However, the result for the remaining four practices was

significant which means that four practices have a significant relationship with the

common problems encountered in cash management.

In terms of disbursing, the result of the test of significance that was

made showed that the first, second, and fourth practices of disbursing have

significant relationship with the common problems encountered and the third and

fifth practices have none.

In terms of controlling, the result of the test of significance that was

made showed that the first and fourth practices under controlling had no

significant relationship with the common problems encountered; however, it also

showed that the second, third, and fifth practices had a significant relationship

with the common problems encountered.

In terms of investing, the result of the test of significance that was made

showed that the first to fourth practices of investing had a significant relationship

with the common problems encountered and the fifth had no.
Conclusions

The following were the conclusions drawn from the findings:

The cash management practices under forecasting have no significant

relationship with the common problems encountered. However, most of the cash

management practices under receiving, disbursing, controlling, and investing

have significant relationship with the common problems encountered. It is safe to

assume that the common problems that the respondents encountered affect the

levels of their cash management practices.

Recommendations

Based on the findings and conclusions of this study, it is observed that

the common problems encountered by the respondents affect the levels of their

cash management practices. The following recommendations were in order.

It is recommended that the respondents must check then re-check and

improve their performances in term receiving, disbursing, controlling, and

investing their cash. The respondents must not let the problems that they

encounter affect their cash management practices. However their performance in

forecasting is good because it is not affected by the common problems that they

encounter.

Regarding the common problems that they encounter, it is inevitable

especially in running a business and managing cash, it is recommended that they

prepare better for the problems that they may encounter in the future.