1

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 its 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.

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

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

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

focusing on the firms 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.

According to the study conducted by Leung (2005), cash plays a vital role
in a companys 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, its easy transferability, and other obvious
characteristics, it is the asset most susceptible to improper diversion and used by

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

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 firms growth and lowers its profitability. Investing
cash, even for a short time, can add to companys 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.

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 years cash flows, and a set of forecast cash flows, with
supporting analysis of the variances between last years 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 nearcash items, such as marketable securities or bank times 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 shortrun 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

Common problems
encountered in cash
management

Dependent Variable

Levels of cash

management practices in
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

Activity Description

Gathering data for

chapters 1 & 2

Construction of the
literature review

Construction of the
questionnaire

Academic Year 2015-2016

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

5 Colloquium
6

Distribution of
questionnaires

Analysis and
interpretation of data.

Final checking and

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

4.51 5.00

Always

3.51 4.50

Oftentimes

2.51 3.50

Sometimes

1.51 2.50

Seldom

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
1. Demographic profile of the
business

Statistical Tools
Frequency, Percentage, Rank
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
cash management practices

Chi-Square

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

90%

Partnership

10%

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
business

Frequency

Percentage

Rank

Retailing

40%

Manufacturing

10%

Service

50%

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

30%

5 - 10 years

50%

11 - 20 years

10%

3.5

21 and above

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
Profit

Frequency

Percentage

Rank

Less than P 10,000

30%

P 10,001 - 25,000

50%

P 25,001 - 40,000

10%

3.5

P 55,001 and above

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

90%

P50,001 - 500,000

10%

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
encountered

Weighted
Mean

Verbal Interpretation Rank

Not enough cash for emergency

expenses

2.3

Seldom

Miscalculations

1.7

Seldom

8.5

Wrong allocation of cash

1.7

Seldom

8.5

Seldom

6.5

Cash overages

2.5

Sometimes

Cash shortages

2.4

Seldom

Seldom

6.5

Poor decisions in handling cash.

2.9

Sometimes

Huge overhead costs

2.1

Seldom

Seldom

6.5

2.16

Seldom

Not enough cash for necessary

obligations

Not enough cash to buy

necessary equipment.

Problems in collecting receivables

Average weighted mean

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

Forecasting

Weighted
Mean

Verbal
Interpretation

Rank

Experiencing poor decisions in

handling cash.

2.9

Sometimes

Experiencing unexpected
expenses.

3.2

Sometimes

Have enough cash allocated

for emergency and unexpected
expenses.

3.5

Sometimes

Have no cash allocated for

emergency and unexpected
expenses.

2.3

Seldom

Experiencing miscalculations
and wrong allocation of cash.

1.7

Seldom

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
Mean

Verbal
Interpretation

Rank

Double checks the amount

received.

4.7

Always

Issues receipts upon receiving

cash.

2.9

Sometimes

Promptly checks if the amount in

the receipt is correct.

3.4

Sometimes

Records the cash received

immediately in the financial
system.

3.7

Oftentimes

Puts the cash immediately in

different drawers to establish
accountability.

3.9

Oftentimes

Average weighted mean

3.72

Oftentimes

Receiving

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

Disbursing

Weighted
Mean

Verbal
Interpretation

Rank

Pays bills and other utilities before

due to avoid any penalties,
interests, or other charges.

4.5

Oftentimes

1.5

Pays loans, notes, and other short

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

4.5

Oftentimes

1.5

Issues loans, notes and other

short or long term borrowings.

Sometimes

Have enough cash to meet

obligations.

Oftentimes

Have not enough cash to meet

obligations.

2.1

Seldom

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
Mean

Verbal
Interpretation

Rank

The owner withdraws its capital

for personal use.

Seldom

Provides separate cash drawers

to establish accountability.

Oftentimes

Records cash overages in the

financial system.

4.2

Oftentimes

Records cash shortages in the

financial system.

3.4

Sometimes

Records daily cash

disbursements.

4.6

Always

Average weighted mean

3.64

Oftentimes

CM Practices : Controlling

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

CM Practices : Investing

Weighted
Mean

Verbal
Interpretation

Rank

Spends cash for the repair and

maintenance of certain equipment.

3.8

Oftentimes

Invests on new equipment for the

business.

3.6

Oftentimes

Saves cash for possible expansion

of the business.

4.4

Oftentimes

Invests cash for business

expansion.

4.2

Oftentimes

The owner uses the cash to buy

his/her personal needs/wants.

2.6

Sometimes

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

Variable df

Level of
Significance

X2

Critical
Verbal
2
Value of x Interpretation

Decision

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

Variable df

Level of
Significance

X2

Critical
Verbal
Value of x2 Interpretation

Decision
Table

R1

40

0.05

113.748

55.758

Reject H0

Significant

R2

40

0.05

55.379

55.758

Accept H0

Not Significant

R3

40

0.05

84.372

55.758

Reject H0

Significant

R4

40

0.05

69.539

55.758

Reject H0

Significant

R5

40

0.05

81.161

55.758

Reject H0

Significant

13
shows
the test
of

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

Variable df

Level of
Significance

X2

Critical
Verbal
2
Value of x Interpretation

Decision

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

Variable df

Level of
Significance

X2

Critical
Verbal
2
Value of x Interpretation

Decision

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

Variable df

Level of
Significance

X2

Critical
Verbal
2
Value of x Interpretation

Decision

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 sarisari 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.