Republic of the Philippines

BATANGAS STATE UNIVERSITY

The National Engineering University
Lipa Campus
A. Tanco Drive, Marawoy, Lipa City, Batangas, Philippines 4217
Tel Nos. (043) 980-0385 loc 3137
E-mail Address: cabe.lipa@g.batstate-u.edu.ph | Website Address: http://www.batstate-u.edu.ph

Proposed Business Plan for Livestock Companies

A Thesis Abstract

Presented to the Faculty of

College of Accountancy, Business and Economics

Batangas State University

The National Engineering University

Marawoy, Lipa City

In Partial Fulfillment of the Requirement for the Degree

Bachelor of Science in Management Accounting

Introduction (to be changed)

Livestock farming is an essential component of the global agricultural industry,

contributing significantly to food security and the livelihoods of millions of people worldwide. In

the Philippines, the livestock sector is a significant contributor to the country's economy,

providing employment and livelihood opportunities for millions of Filipinos. Livestock, such as

cattle, poultry, swine, and other animals raised for commercial purposes, are considered

biological assets by businesses. These assets play a crucial role in the financial performance of

livestock companies. However, the mortality rate of these biological assets can have a profound

impact on the financial stability and profitability of livestock businesses.

Understanding the effect of the mortality rate of biological assets on the financial

performance of livestock companies is particularly important in the context of Lipa City,

Batangas. Lipa City is known for its vibrant livestock industry, with numerous livestock

companies operating in the area. These companies, both large-scale and small-scale, heavily rely

on the performance of their biological assets for their economic sustainability.

Fluctuations in the mortality rate of biological assets can present significant challenges to

livestock companies in Lipa City. The unpredictable nature of these fluctuations makes it

difficult for companies to plan and manage their resources effectively. Higher mortality rates can

result in lower productivity, increased costs, and reduced profitability. This impact is especially

pronounced for small-scale livestock companies that may have limited resources and capacity to

cope with the consequences of fluctuating mortality rates.

To address these challenges and support the development of resilient and sustainable

livestock businesses, it is crucial to conduct research on the effect of mortality rates of biological

assets on the financial performance of livestock companies in Lipa City. By gaining a deeper
understanding of these dynamics, valuable insights can be obtained to develop effective

strategies, interventions, and risk management practices tailored to the specific needs of livestock

companies in the area.

Background of the Study (to be changed)

Livestock industry in Batangas is a major industry because it controls agricultural land,

invests its capitals in businesses, and focuses on chicken and pig production; this is based on the

study of Costales and Delgado (2016). The pig and poultry industries in Batangas City have

grown rapidly due to high demand and the use of better breeding and nutrition that is practiced

by both small and large raisers. Moreover, the support from commercial suppliers and feed

millers, including extension services and credit for inputs, has been important in helping farmers

adopt these improvements.

However, the livestock industry in Batangas is facing big challenges, as discovered by

the study made by Baconguis (2016). One of the main problems is the high costs of production,

especially the expensive animal feed. This makes it hard for the industry to compete globally and

puts it at risk from imported goods. Additionally, the industry is constantly threatened by pests

and diseases, posing risks to the overall livestock population, including neighboring farmers.

A significant concern in the livestock industry of Batangas Province, which is the

unstable fluctuations in the mortality rate of biological assets, was highlighted in the words of

Bas (2018). These fluctuations have a notable impact on the financial performance of livestock

businesses, creating difficulties in planning and resource management. Consequently, lower

productivity, increased costs, and reduced profitability are observed. Small-scale livestock

owners, who have limited resources and capacity to handle these fluctuations, are particularly

affected by these challenges. Various factors contribute to these fluctuations, including diseases,
natural disasters, climate change, and other underlying causes. Furthermore, David (2019)

revealed that the consequences of these fluctuations in the mortality rate can deeply affect the

financial performance of livestock businesses, especially for small-scale owners who heavily

depend on these assets for their livelihoods.

Additionally, the study by Zarei et al. (2020) provides a comprehensive review of the

effects of the COVID-19 pandemic on the global livestock and poultry industry. The authors

explore the impact of the pandemic on various aspects of the industry, such as production,

processing, distribution, and consumption. The study notes that the pandemic has disrupted

global supply chains, leading to challenges in sourcing inputs, transporting products, and

accessing markets. These disruptions have been particularly severe for small-scale farmers and

processors who lack the necessary resources to cope with the changing circumstances.

Fragoso et al. (2019) examined the impact of mortality risk on the financial performance

of livestock farms, specifically focusing on the swine industry. The study concluded that higher

mortality rates significantly reduce profitability and financial performance in swine farms. The

researchers found that implementing effective risk management strategies, such as disease

prevention measures and proper nutrition, can help mitigate the negative impact of mortality risk

on financial outcomes. This study's findings support the study by emphasizing the importance of

understanding and managing fluctuating mortality rates to improve financial performance in the

livestock industry.

In addition, Hossain et al. (2018) investigated the relationship between mortality rates

and financial performance in the poultry industry. The study concluded that higher mortality

rates have a negative effect on the profitability and financial performance of poultry farms. The

researchers highlighted the need for implementing proactive measures to prevent and control
diseases, improving biosecurity practices, and enhancing the overall management of poultry

farms to reduce mortality rates and improve financial outcomes. This study's conclusions

emphasize the significance of addressing fluctuating mortality rates to enhance financial

performance in the livestock industry.

Building upon the existing body of literature, this study aims to evaluate the extent of the

impact of fluctuating mortality rates on the financial performance of livestock businesses in Lipa

City, Batangas. Through comprehensive analysis, it seeks to provide insights into potential

interventions and strategies that can help alleviate the challenges posed by these fluctuations.

Ultimately, the findings of this study can contribute to the formulation of policies and programs

that enhance the resilience and sustainability of the livestock industry in the face of fluctuating

mortality rates and other external factors.

Theoretical Framework

The theoretical framework of this study provides a basis for understanding the

relationship between the fluctuating mortality rates of biological assets and the financial

performance of livestock businesses in Batangas.

To explain how the mortality rate of biological assets affects the financial performance of

livestock companies in Batangas, we can examine Stobierki’s(2020) 13 Key Performance Indicators

(KPIs) in his article titled “13 FINANCIAL PERFORMANCE MEASURES MANAGERS SHOULD

MONITOR” . The following 13 KPIs provide insights into different aspects of financial performance and

can help elucidate the impact of mortality rates, allowing for a comprehensive assessment of how

mortality rates directly influence the financial performance and viability of livestock companies in

Batangas.

The first set of key performance indicators (KPIs) focuses on profitability, specifically the Gross

Profit Margin and Net Profit Margin. The Gross Profit Margin reflects the percentage of revenue that
remains after deducting the cost of goods sold, while the Net Profit Margin measures the percentage of

revenue that remains as net profit after accounting for all expenses. High mortality rates in the livestock

industry can significantly impact profitability by increasing production costs, such as the need to replace

lost livestock and provide veterinary care. By tracking these KPIs over time, companies can demonstrate

how mortality rates directly affect their ability to generate profits. Declining Gross Profit Margin and Net

Profit Margin serve as indicators of the financial strain caused by mortality rates, highlighting the

increased costs and reduced profitability that businesses face.

Another important aspect to consider is liquidity and financial health. KPIs such as Financial

Leverage, Return on Equity, Return on Assets, Operating Cash Flow, and Seasonality provide insights

into a company's ability to meet short-term obligations, maintain a healthy capital structure, generate cash

flow, and understand the cyclical patterns of mortality rates. Increased mortality rates can reduce the

value of livestock assets, potentially affecting working capital and liquidity. Financial Leverage and

Return on Equity highlight the impact of mortality rates on a company's capital structure and its ability to

generate returns for shareholders. Return on Assets measures the efficiency of asset utilization, which can

be influenced by fluctuations in mortality rates. Operating Cash Flow reflects the cash generated from

core operations and can be affected by the increased expenses associated with mortality rates.

Additionally, considering the Seasonality of mortality rates allows companies to capture the cyclic

patterns and their corresponding financial impact, providing a deeper understanding of the dynamics at

play and aiding in financial planning and decision-making.

Through a comprehensive analysis of these 13 KPIs, livestock companies in Batangas can

effectively establish and prove the direct relationship between the mortality rate of biological assets and

their financial performance. The data-driven insights gained from these KPIs not only highlight the

tangible effects of mortality rates but also enable companies to make informed decisions to mitigate

losses, optimize operations, and enhance their overall financial performance and sustainability in the

livestock industry.
Statement of the Problem

This study aimed to propose a business plan for Livestock Companies in Batangas. Specifically,

it sought answers to the following questions:

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

1.1. Type of Livestock Offered;

1.2. Capitalization;

1.3. Years of Operation;

1.4. Average Monthly Income; and

1.5. Mortality Rate?

2. How do the business assess the effect of mortality rate to financial performance in terms of:

2.1. Gross Profit Margin;

2.2. Net Profit Margin;

2.3. Leverage;

2.4. Return on Equity;

2.5. Return on Assets;

2.6. Operating Cash Flow; and

2.7. Seasonality?

3. Is there a significant relationship between profile variables and level of financial performance

when grouped according to profile?

4. Based on the result, what course of action may be proposed?

Proposed Respondents of the Study

The targeted respondents of this study entitled “Proposed Business Plan for Livestock Companies

in Batangas” are the owners of pig and poultry farms situated in selected municipalities in 4 th District of

Batangas such as San Jose, Rosario, and Padre Garcia, who have been operating for more than three years

and are within the age bracket of 30-75 years old. The reason why these business owners are the subject

of this research is that they have first-hand experience in handling the financial performance of their
biological assets, specifically pigs and poultry, which are the main focus of the study. Their insights and

experiences will provide valuable data and information that can help the researchers investigate the

impact of changes in the mortality rates of biological assets on the financial performance of livestock

businesses in Batangas. Their responses to the survey will be crucial in establishing a relationship

between the profile variables and the financial performance of the livestock businesses in Batangas.

Leading Innovations, Transforming Lives, Building the Nation