Cash Management Thesis Chapters 1- 4

8/19/2019 Cash Management Thesis Chapters 1- 4

1/43

1

Chapter 1

THE PROBLEM AND ITS BACKGROUND

Introducton

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. uccessfully 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. !isely managing cash enables a business to meet une"pected

e"penses in addition to handling regularly#occurring events.


2/43

2

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.

!e chose this matter as the sub%ect 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.

uccessful 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.

Bac!"round o# the Stud$

ince the &''(s, there has been a resurgence of interest on the role of

small scale business enterprises in the )hilippines, in national and international

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

success of the economy. *ot 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 decentrali-ed, even

locali-ed, approach. s such, many scholars, practitioners, and institutions

involved in economic development have begun to recogni-e the important roles


3/43

3

that smaller#scale business entities play in the economy and society. /ore 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. ll 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. ome 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.

Lterature Re%e&

0abil +1(&1 cited that 2cash management means the management of

liquidity in order to meet their day#to#day commitment3.

Tonen +1((4 the researcher stated that 2it is reasonable to e"pect 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.3

)andey +1((4 2Cash 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 basis5 it is also the ultimate output e"pected to be reali-ed 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 firm6s manufacturing

operations while e"cessive cash will simply remain idle without contributing


4/43

4

anything towards the firm6s profitability. Thus, a ma%or function of the financial

manager is to maintain a ound cash position.3

Isidro +1(&7 shared her views on the importance of cash. he stated that

2Cash 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.3

2Cash 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. 8ven if your business is turning in a profit, you can still be

forced to close if your business runs out of cash93

:audato +1(&; stated that 2cash 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 effectively3.

he also mentioned in her study that 2the cash management is the

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

0ecause the cash move so readily between bank accounts and financial assets,

cash management really means the management of all the resources3.

ccording to ou need to understand the difference

between strategic and operating plans, and the role of each$ the importance of

http://www.powerhomebiz.com/blog/tag/cash-flow/http://www.powerhomebiz.com/blog/tag/pricing/http://www.powerhomebiz.com/blog/tag/pricing/http://www.powerhomebiz.com/blog/tag/cash-flow/


5/43

5

focusing on the firm’s cash flows$ and how use of pro forma statements can head

off trouble for the firm.

Tennet +1(&1 mentioned in his book, 2of all the resources cash is

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

buy almost any other resources in which it may be deficient3.

?ichardson +1((7 stated that 2cash management is the movement of

funds through financial institutions to optimi-e liquidity. It is the management of

corporate funds to increase interest income earned by ma"imi-ing investments

and@or reducing interest paid by minimi-ing borrowings3.

Ae also mentioned that 2cash management is a financial discipline that

uses the same principles, regardless of the type of business, si-e or age of an

enterprise3.

2Cash management is not an accounting function. The accountant records

and reports transactions historically$ the cash manager plans and e"ecutes these

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

efficiently manage cash resources and satisfactorily resolve cash shortages

surpluses3.

/organ +1((7 mentioned in his book that 2cash is one of your most

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

financial strength3.

!ard +1(&; stated that 2cash flow management is the process of

monitoring, analy-ing, and ad%usting their business’ cash flows3.


6/43

6

ccording to the study conducted by :eung +1((7, 2cash plays a vital role

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

ta"es 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. /ost importantly, it keeps

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

mentioned 2the ob%ectives of cash management5 +a to have sufficient cash for

operation in order to maintain liquidity$ and +b to invest e"cess cash for a return3.

2It was also mentioned that 2cash is the most active item on the

accounting statements. The movement of cash completes almost all purchases

and sales transactions. )urchases 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 e"change.3

2In striking contrast to the activity of cash is its unproductive nature. ince

cash is the measure of value, it cannot e"pand or grow unless it is converted into

some other properties. 8"cessive cash balances of cash on hand are often

referred to as 2idle cash3. 8fficient cash management requires that available cash

be continuously working in one of several ways B for e"ample, 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


7/43

7

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.3

!altson et al +1((4, e"plained that cash management as the concept

which is concerned with optimi-ing the amount of cash available, ma"imi-ing the

interest earned by spare funds not required immediately and reducing losses

caused by delays in the transmission of funds.

ccording to Davidson et al, +1((7, 2cash is any medium of e"change,

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. cceptability to a

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

)lanning, controlling, and accounting for cash transactions and cash balances. It

is channeling available cash into e"penditures that enhance productivity, directly

or indirectly3.

Team /8 +1(&; cited in their book that 2management 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

organi-ation3.

ccording to immerer et al +1((E 2cash 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


8/43

8

task because it is the most important yet least productive asset that a small

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

will be declared bankrupt. Creditors, employees and lenders e"pect to be paid on

time and cash is the required medium of e"change, however, some firms retain

an e"cessive amount of cash to meet any une"pected 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. )roper 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 owns3.

Cash management is particularly important for new and growing

businesses. Davidson et al, +1((7 indicated in their book that 2cash flow can be

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

product to its customers, and en%oys a sterling reputation in its industry.

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

of unanticipated e"penses. They also may e"perience trouble in finding the funds

for innovation or e"pansion. inally, poor cash flow makes it difficult to hire and

retain good employees3.

2Cash management has four ma%or functions$ determination of minimum

cash balances, effective borrowing, advantageous investment of e"cess cash,

and acceleration of cash flow3.


9/43

9

2The 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 e"cess cash earns nothing

and loses purchasing power in period of rising prices3.

Aofstrand, +1(&; said that 2cash flow statement is one of the most

important financial statements for a pro%ect 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 pro%ect.3

ardakis +1((4 stated that 2it is very important to have efficient and

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

smaller ones3.

!esterfield et al, +1((4 noted that 2it is important to distinguish between

true cash management and a more general sub%ect of liquidity management. The

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

two different ways3.

2irst, it has its literal meanings, actual cash on hand. Aowever, financial

managers frequently use the word to describe a firm6s 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 added3.


10/43

1

0

!oodward et al, +1((4 2Cash 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 emphasi-es 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 avoided3.

Fasilo, +1((7 2Cash flows from operations are the amount of cash a firm

generates in a measured time from its operation. Garious 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 funds3.

Aampton +1((= 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. ometimes 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.


11/43

1

1

Theoretca' (ra)e&or!

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 e"pected 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. /orris

+&'E; 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 /iller and Hrr type. artoris and Aill +&'E; 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 /iller and Hrr 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.

s per the /iller and Hrr 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.

!hen 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


12/43

1

2

level. If the cash balance of the company reaches the lower level then the

company trades its saleable securities and gathers enough cash to fi" the

problem.

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

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

net cash flows has a standard deviation. The /iller and Hrr model of cash

management also assumes that distribution of cash flows is normal.


13/43

1

3

Conceptua' (ra)e&or!

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 )angil, :aguna. The lines connecting the two

frames showed the relationships that e"ist among variables.

Independent *ara+'e Dependent *ara+'e

("ure 1, The conceptua' parad") -ho&n" the nterp'a$ o# the %ara+'e- o#

the -tud$,

Co))on pro+'e)-

encountered n ca-h

)ana"e)ent

Le%e'- o# ca-h

)ana"e)ent practce- n

-e'ected -)a'' -ca'e

+u-ne-- e-ta+'-h)ent-

n Pan"'. La"una n ter)

o#/

(oreca-tn"

Rece%n"

D-+ur-n"

Contro''n"

In%e-tn"


14/43

1

4

State)ent o# the Pro+'e)

The study was conducted to investigate all aspects of cash management

practices of selected small scale businesses in )angil, :aguna.

pecifically, this study aimed to answer the following questions5

&. !hat is the business profile of the respondents in terms of5

• orm of 0usiness

• *ature of the 0usiness

• >ears of 8"istence

• verage /onthly )rofit

• tarting Capital

1. !hat are the common problems encountered by small scale businesses in

cash management;. !hat are the levels of cash management practices in term of 5

a. orecastingb. ?eceivingc. Disbursingd. Controllinge. Investing

J. Is there a significant relationship between the common problems encountered

and the levels of cash management practices

Re-earch H$pothe--

H0 There is no significant relationship between the common problems

encountered and the levels of cash management practices.

S"n#cance o# the Stud$


15/43

1

5

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.

A- to Teacher-. To provide additional information about the importance of

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

everyday lives.

A- to the Co))unt$. To help them reali-e the importance as well as the

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

A- to Student-. To help them to become more aware of the importance of

currency, to make them reali-e and appreciate the value of handling cash

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

A- to (uture Re-earcher-. This study can be the basis for future

research works and may be a source for related literature.

A- to the Schoo'. The :aguna /aritime rts and 0usiness Colleges can

use the results and recommendations to improve the curriculum for the 0usiness

dministration Department.

Scope and L)taton o# the Stud$

The study was limited only to the registered small scale businesses

located in )angil, :aguna. The study was conducted in the year from 1(&7 up to

1(&=. The researchers utili-ed descriptive research.

De#nton o# Ter)-


16/43

1

6

To have better understanding of the te"ts which were used in this study,

the researchers defined the following terms5

Ca-h, refers to money in the form of coins and bills as distinct from money

orders or credit.

Ca-h Mana"e)ent, refers to the way in which a person or organi-ation

manages money.

S)a'' Sca'e +u-ne--e-, refers to businesses in )angil, :aguna with less

than 7(( employees and had a starting capital of not more than 7 million pesos.

(oreca-tn", 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 )angil,

:aguna.

Rece%n", refers to the acquisition of cash by the selected small scale

business establishments in )angil, :aguna.

D-+ur-n", refers to the paying out of money of the selected small scale


Contro''n", The act of managing cash by the selected small scale


In%e-tn", The act of using cash in order to buy something, especially one

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


17/43

1

7


18/43

Chapter

RESEARCH DESIGN AND METHODOLOG2

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.

Re-earch De-"n

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 summari-e and

describe numerical data for the purpose of easier interpretation +Fa-mier, 1((J.

Re-pondent- o# the Stud$

The respondents of the study were the registered business establishments

that were classified as micro to small scale in selected areas in )angil, :aguna.

The researchers chose a total of &( respondents for the investigation.

Sa)p'n" Techn3ue-

Kuota 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.


19/43

Gantt chart

Act%t$ De-crptonAcade)c 2ear 0145016

7un 7u' Au" Sep Oct No% Dec 7an (e+ Mar

&


20/43

The table below showed the budgetary requirements of the researchers

while conducting the research. The required amount was ) E((.(( and it was

allocated for transportation e"penses, computer rentals for research and editing,

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

and e"penses for documentation.

The budgetary requirements of the study

E8pen-e- E-t)ated co-t

Transportation ) &((.((

Computer rentals ) ;7(.((

)rinting and photocopying ) 17(.((

Hther e"penses ) &((.((

Tota' P 900,00

Data Gathern" Procedure-

)articipants were informed about the nature and purpose of the study and

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

)articipants 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.

Hnce the questionnaires have been completed and collected, the researchers

had gone through the data and analy-ed the information received.

Re-earch In-tru)ent-


21/43

The questionnaire was divided into functional areas as follows5 )art I

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

of their business, the years of the business’ e"istence, average monthly profit

and the starting capital. )art 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.

Sca'e Ran"e Inter%a' *er+a' Interpretaton

7 J.7& B 7.(( lways

J ;.7& B J.7( Hftentimes

; 1.7& B ;.7( ometimes

1 &.7& B 1.7( eldom

& &.(( # &.7( *ever

Stat-tca' Too'-

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

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

research instrument. The researchers utili-ed percentage, weighted mean, and

chi#square to treat the following variables.

STATISTICAL TOOLS

*ara+'e Stat-tca' Too'-

&. Demographic profile of the

business

requency, )ercentage, ?ank

!eighted mean, ?ank


22/43

1. Common problems encountered

;. :evels of cash management

practices in term of5

a. orecasting

b. ?eceiving

c. Disbursing

d. Controlling

e. Investing !eighted mean, ?ank

J. ?elationship between the common

problems encountered and the levels of

cash management practices

Chi#quare


23/43

Chapter :

PRESENTATION. ANAL2SIS. AND INTERPRETATION O( DATA

This chapter presents, analy-es, 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, Bu-ne-- Pro#'e o# the Re-pondent-

ll the respondents in this study are categori-ed into micro to small scale

business. Their business profiles are e"plained further in this study.

Ta+'e 1/ (or) o# Bu-ne--

(or) o# +u-ne-- (re3uenc$ Percenta"e Ran!

ole )roprietorship ' '(M &

)artnership & &(M 1

Tota' 10 100; 5


24/43

Table & shows the form of the business of the respondents. *inety 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. ole proprietorship

form of business was more common among the respondents.

Ta+'e / Nature o# the Bu-ne--

Nature o# the

+u-ne--(re3uenc$ Percenta"e Ran!

?etailing J J(M 1

/anufacturing & &(M ;

ervice 7 7(M &

Tota' 10 100; 5

Table 1 shows the nature of the business of the respondents. ifty 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. /ost of the respondents

were engaged in service.

Ta+'e :/ 2ear- n e8-tence

2ear- n e8-tence (re3uenc$ Percenta"e Ran!

less than 7 ; ;(M 1

7 # &( years 7 7(M &


25/43

&& # 1( years & &(M ;.7

1& and above & &(M ;.7

Tota' 10 100; 5

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

e"isted. ifty per cent of the respondents, with a frequency of five, and ranked

as first, have been in business for 7 # &( years, thirty per cent of the

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

operating for less than 7 years, ten per cent have been e"isting for && # 1( years

and another ten per cent are operating for more than 1& years, both with a

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

business for 7 # &( years.

Ta+'e


26/43

between ) &(,((( # 17,(((. Three of the respondents, with the percentage of

thirty and ranked as second, have a monthly profit of less than ) &(,(((. Hne of

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

17,((( # J(,(((, another ten per cent of the respondents, with a frequency of

one, has a monthly profit of ) 77,((& and above. 0oth are ranked as last.

Ta+'e 4/ Startn" capta'

Startn" capta' (re3uenc$ Percenta"e Ran!

:ess than ) 7(,((( ' '(M &

)7(,((& # 7((,((( & &(M 1

Tota' 10 100; 5

Table 7 shows the amount of starting capital of each respondent. *inety

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

than 7(,((( and only ten per cent of the respondents, with a frequency of one,

had a starting capital between )7(,((& # 7((,(((.


27/43

, Co))on pro+'e)- encountered n ca-h )ana"e)ent

Co))on pro+'e)-

encountered

=e"hted

Mean*er+a' Interpretaton Ran!

*ot enough cash for emergency

e"penses1.; eldom J

/iscalculations &.4 eldom E.7

!rong allocation of cash &.4 eldom E.7

*ot enough cash for necessary

obligations1 eldom =.7

Cash overages 1.7 ometimes 1

Cash shortages 1.J eldom ;

*ot enough cash to buy

necessary equipment.1 eldom =.7

)oor decisions in handling cash. 1.' ometimes &

Auge overhead costs 1.& eldom 7

)roblems in collecting receivables 1 eldom =.7

A%era"e &e"hted )ean ,16 Se'do)

Ta+'e 6/ Co))on pro+'e)- encountered n ca-h )ana"e)ent


28/43

Table = presents the common problems that the respondents encountered

when managing their cash. !ith a weighted mean of 21.'3, and ranked as first,

the most common problem that the respondents encounter when managing their

cash was having poor decisions. !ith a weighted mean of 2&.43, the respondents

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

ranked as last.

:, Ca-h )ana"e)ent practce-

Ta+'e >/ Ca-h )ana"e)ent practce- n ter) o# (oreca-tn"

(oreca-tn"=e"hted

Mean

*er+a'

InterpretatonRan!

8"periencing poor decisions in

handling cash.1.' ometimes ;

8"periencing une"pected

e"penses.;.1 ometimes 1

Aave enough cash allocatedfor emergency and une"pected

e"penses.

;.7 ometimes &

Aave no cash allocated for

emergency and une"pected

e"penses.

1.; eldom J

8"periencing miscalculations

and wrong allocation of cash.&.4 eldom 7

A%era"e &e"hted )ean ,> So)et)e-


29/43

Table 4 presents the levels of cash management practices of the

respondents in term of forecasting. !ith a weighted mean of 2;.73 and ranked as

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

une"pected e"penses. !ith a weighted mean of 2&.43 and ranked as last, the

respondents seldom e"periences miscalculations and wrong allocation of cash.

Ta+'e 9/ Ca-h )ana"e)ent practce- n ter) o# Rece%n"

Rece%n"=e"hted

Mean

*er+a'

InterpretatonRan!

Double checks the amountreceived.

J.4 lways &

Issues receipts upon receiving

cash.1.' ometimes 7

)romptly checks if the amount in

the receipt is correct.;.J ometimes J

?ecords the cash received

immediately in the financial

system.

;.4 Hftentimes ;

)uts the cash immediately in

different drawers to establish

accountability.

;.' Hftentimes 1

A%era"e &e"hted )ean :,> O#tent)e-

Table E shows the levels of cash management practices of the

respondents in term of receiving cash. !ith a weighted mean of 2J.43 and ranked

as first, the respondents always double check the amount that they receive. Hn


30/43

the other hand, with a weighted mean of 21.'3 and ranked as last, the

respondents only issues receipts upon receiving cash occasionally.

Ta+'e ? / Ca-h )ana"e)ent practce- n ter) o# D-+ur-n"

D-+ur-n"=e"hted

Mean

*er+a'

InterpretatonRan!

)ays bills and other utilities before

due to avoid any penalties,

interests, or other charges.

J.7 Hftentimes &.7

)ays loans, notes, and other short

or long term borrowings before

due to avoid any penalties and

other interests.

J.7 Hftentimes &.7

Issues loans, notes and other

short or long term borrowings.; ometimes ;

Aave enough cash to meet

obligations.J Hftentimes 1

Aave not enough cash to meet

obligations.1.& eldom J

A%era"e &e"hted )ean :,6 O#tent)e-

Table ' shows the levels of cash management practices by the

respondents in term of disbursing cash. !ith same weighted mean of 2J.73 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


31/43

penalties. Aowever, with a weighted mean of 21.&3, the respondents seldom

e"periences having not enough cash to meet their necessary obligations.

Ta+'e 10/ Ca-h )ana"e)ent practce- n ter) o# Contro''n"

CM Practce- / Contro''n"=e"hted

Mean

*er+a'

InterpretatonRan!

The owner withdraws its capital

for personal use.1 eldom 7

)rovides separate cash drawersto establish accountability.

J Hftentimes ;

?ecords cash overages in the

financial system.J.1 Hftentimes 1

?ecords cash shortages in the

financial system.;.J ometimes J

?ecords daily cash

disbursements.J.= lways &

A%era"e &e"hted )ean :,6< O#tent)e-

Table &( shows the levels of cash management practices by the

respondents in term of controlling. !ith a weighted mean of 2J.=3 and ranked as

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

hand, with a weighted mean of 213 and being last in the ranking, the respondents

seldom withdraw the business’ capital for personal use.


32/43

Ta+'e 11 / Ca-h )ana"e)ent practce- n ter) o# In%e-tn"

CM Practce- / In%e-tn"=e"hted

Mean

*er+a'

InterpretatonRan!

pends cash for the repair and

maintenance of certain equipment.;.E Hftentimes ;

Invests on new equipment for the

business.;.= Hftentimes J

aves cash for possible e"pansion

of the business.J.J Hftentimes &

Invests cash for business

e"pansion.J.1 Hftentimes 1

The owner uses the cash to buy

his@her personal needs@wants. 1.= ometimes 7

A%era"e &e"hted )ean :,> O#tent)e-

Table && shows the levels of cash management practices of the

respondents in term of investing. !ith a weighted mean of 2J.J3, and ranked as

first, the respondents often save cash for the possibility of e"panding their

business. Aowever, with a weighted mean of 21.=3, and ranked as last, the

respondents sometimes uses the cash to buy their personal needs and@or wants.


33/43


34/43

encountered have no significant relationship with the levels of cash management

practices in term of forecasting.

Ta+'e 1:/ S"n#cant Re'aton-hp Bet&een the Co))on Pro+'e)-

encountered and the Le%e'- o# Ca-h Mana"e)ent Practce- n ter) o#

Rece%n"

Table

&;

shows

the test

of

significance between the common problems encountered and the levels of cash

management practices in term of receiving. ?&, ?1, ?;, ?J and ?7 represent the

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

significance shows that the computed chi square for ?&, ?;, ?J and ?7 was

higher than the critical value of chi square which was 77.47E. ?&, ?;, ?J, and ?7

have a significant relationship with the common problems encountered in cash

management. Aowever, the result of the computed chi square for ?1 was lower

than the critical value of chi square which means that the decision for ?1 is to

accept the null hypothesis. ?1 has no significant relationship with the common

problems encountered in cash management.

*ara+'e df Le%e' o#

S"n#cance@

Crtca'

*a'ue o# 8*er+a'

InterpretatonDec-on

?& J( (.(7 &&;.4JE 77.47E ?e%ect A( ignificant

?1 J( (.(7 77.;4' 77.47E ccept A( *ot ignificant

?; J( (.(7 EJ.;41 77.47E ?e%ect A( ignificant

?J J( (.(7 ='.7;' 77.47E ?e%ect A( ignificant

?7 J( (.(7 E&.&=& 77.47E ?e%ect A( ignificant


35/43

Ta+'e 1


36/43

Ta+'e 14/ S"n#cant Re'aton-hp Bet&een the Co))on Pro+'e)-

encountered and the Le%e'- o# Ca-h Mana"e)ent n ter) o# Contro''n"

*ara+'e df

Le%e' o#

S"n#cance @

Crtca'

*a'ue o# 8*er+a'

Interpretaton Dec-on

C& J( (.(7 J1.(J; 77.47E ccept A( *ot ignificant

C1 J( (.(7 ==.71J 77.47E ?e%ect A( ignificant

C; J( (.(7 4=.((; 77.47E ?e%ect A( ignificant

CJ J( (.(7 7;.'E1 77.47E ccept A( *ot ignificant

C7 J( (.(7 ';.&EJ 77.47E ?e%ect A( ignificant

Table &7 shows the test of significance between the common problems

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

C&, C1, C;, CJ and C7 represent the five common practices of controlling. The

result of the test of significance shows that the computed chi square for C1, C;

and C7 was higher than the critical value of chi square which was 77.47E and

therefore verbally interpreted as re%ect the null hypothesis, C1, C;, and C7 have

a significant relationship with the common problems encountered in cash

management. Hn the other hand, the result of the computed chi square for C&

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

interpreted as accept the null hypothesis. C& and CJ have no significant

relationship with the common problems encountered in cash management.


37/43

Ta+'e 16/ S"n#cant Re'aton-hp Bet&een the Co))on Pro+'e)-

Encountered and the Le%e'- o# Ca-h Mana"e)ent Practce- n ter) o#

In%e-tn"

*ara+'e df Le%e' o#

S"n#cance@

Crtca'

*a'ue o# 8*er+a'

InterpretatonDec-on

I& J( (.(7 7E.E=4 77.47E ?e%ect A( ignificant

I1 J( (.(7 7=.(17 77.47E ?e%ect A( ignificant

I; J( (.(7 ';.4'= 77.47E ?e%ect A( ignificant

IJ J( (.(7 4;.E'& 77.47E ?e%ect A( ignificant

I7 J( (.(7 J4.J;& 77.47E ccept A( *ot ignificant

Table &= shows the test of significance between the common problems

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

I&, I1, I;, IJ and I7 represent the five common practices under investing. The

result of the test of significance shows that the computed chi square of I&, I1, I;

and IJ has e"ceeded the critical value of chi square which was 77.47E, which

means that is it significant. I&, I1, I; and IJ have significant relationship with the

common problems encountered in cash management. Aowever, the computed

chi square of I7 did not e"ceed the critical value and therefore is not significant.

I7 has no significant relationship with the common problems encountered in cash

management.


38/43

Chapter <

SUMMAR2. CONCLUSIONS. AND RECOMMENDATIONS

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

the recommendations given by the researchers.

Su))ar$ o# #ndn"-

The following were the summary of findings5

1, Bu-ne-- pro#'e o# the Re-pondent-

a (or) o# +u-ne--

*ine 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 )angil, :aguna.

+ Nature o# the +u-ne--

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

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

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

eateries. /ost of the respondents that were engaged in retailing owned sari#

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

bakeshop.


39/43

c 2ear- n e8-tence

ive of the respondents have been in business for 7 to &( years, three

are in less than 7, one has been in business for && to 1( and one is more

than 1& years.

d Startn" capta'

*ine out of the ten respondents had a starting capital of less than

)7((,(((, only one of the respondents had a starting capital within the range

of )7((,((& up to )&,(((,(((.

e A%era"e )onth'$ pro#t

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

range of )&(,((& up to )17,(((, three had less than )&(,(((, one had an

average monthly profit within the range of )17,((& up to )J(,(((, and one

respondent had an average monthly profit of more than )77,(((.

, Co))on pro+'e)- encountered

The respondents encountered cash management problems like having

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

like having not enough cash for emergency e"penses and necessary obligations,

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

costs, and problems collecting receivables were seldom e"perienced by the

respondents.


40/43

:, Ca-h )ana"e)ent practce-

a Ca-h )ana"e)ent n ter)- o# (oreca-tn"

The result of the investigation stated that the average weighted mean

for cash management practices in term of forecasting was 21.413, which

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

by the respondents occasionally.

+ Ca-h )ana"e)ent n ter)- o# Rece%n"

The result of the investigation showed that the average weighted mean

for cash management practices in term of receiving was 2;.413, 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 Ca-h )ana"e)ent n ter)- o# D-+ur-n"

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

disbursing had an average weighted mean of 2;.=13, which means that the

respondents often do most of the cash management practices when

disbursing cash.

d Ca-h )ana"e)ent n ter)- o# Contro''n"


controlling had an average weighted mean of 2;.=J3, which means that the


41/43

respondents often do most of the cash management practices in controlling

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

e Ca-h )ana"e)ent n ter)- o# In%e-tn"


investing had an average weighted mean of 2;.413, which means that the

respondents often do most of the cash management practices when

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

and@or wants occasionally.


42/43

problems encountered. Aowever, 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.


43/43

Conc'u-on-

The following were the conclusions drawn from the findings5

The cash management practices under forecasting have no significant

relationship with the common problems encountered. Aowever, 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.

Reco))endaton-

0ased 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. Aowever their performance in

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

encounter.

?egarding 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.

Documents

Cash Management Thesis Chapters 1- 4