CHAPTER 1

INTRODUCTION

1.1 RATIONALE OF THE STUDY

The Printing industry has contended with a variety of challenges over the past five

years. Consumers are increasingly favoring digital alternatives, such as online media,

over printed materials. Oftentimes, soft copies of these reading materials are saved into

handheld devices making it more convenient and practical for users. For many media

products, the printing world has proven to be slow to produce and too costly to distribute.

As a result, newer forms of media have been leeching away from this industrys demand

(morrisanderson.com). In addition, technology changes so fast that the equipment for

printing should be upgraded from time to time and this is very costly. Furthermore, human

and machine labor is utilized in this business and their costs constitute a large portion of

the expenses. The suppliers availability and the timely delivery of printing supplies also

affect the rendering of services. These problems impose more stress to small and

medium enterprises in the printing press sector as this constrains them from venturing

into economic expansion.

According to Linda McMaken, in her journal in Investopedia.com, she stated that

in the last few years there has been a rise in usage of digital media over the traditional

media. This is because of the ease of access the former provides. However, the cost of

maintaining an e-book business as oppose to the traditional paper bounded books

showed no difference. If not, the cost of maintaining a digital media is more expensive

1
because of the security measures that it has to implement into its documents to avoid

copyright infringement or hacking, thus proving the viability of the traditional media.

Lack of standardization, incomplete feature list, and difficulty of access are just a

few of the problem faced by this new wave of media. E-books and other electronic media

are created so that they can only be opened with a proper authorization and this make

use of different software which is inconvenient for users because they may have to

purchase another program just to access another program which they just had purchased.

Another thing is the ease of using it, unlike with the traditional media where you can

annotate without any problem, some electronic media alternatives are protected so that

you cannot edit or put comments in them, not maximizing its usage. Then we have the

problem with accessing of these media devices as they cost much with only a few years

life span. (The Reflective educator, Davidwees.com)

In a country where majority of the students still cannot afford investing in the digital

media alternatives, the other choice of using hard or soft bound copies of books is still the

better option for this population (Aldaba 2015). Although prices of this media devices have

been going down since its introduction into the Philippine market, students preferential

of using the physical books is still pervasive, evidencing that printing press services are

still needed.

Businesses still use the distribution of flyers, handing out of brochures, and putting

up of tarpaulins as methods of advertising their products and services, making them as

one of the major clients of printing presses. In a country where traditional practices are

still observed, business wise, traditional media still find its way through and proving its

effectiveness.

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 As demand still exists for printing services, the micro and small entities in this

industry needs to understand this phenomenon and make use of this knowledge in

advancing their internal processes through a clear financial management framework, to

which they tend to overlook. On the other hand, an article from aseanup reiterates that

trade will be more bearable as duties chargeable to importation of products from the

ASEAN-membered countries will be cut to up to 99.2%. A big advantage for small and

micro businesses as it opens a new line of supply system from abroad. A good indication

to venture in to a new business because of the better opportunity the ASEAN

phenomenon offers.

Thus, this study aimed to develop a sound financial management framework for

the micro and small entities in the printing press industry within Cebu City and to have a

standardized financial management framework or, for entrepreneurs who are thinking to

venture in such business, a premade framework to which they can begin with. In addition,

this study presented an opportunity for the micro and small entities to think competitively

with the ASEAN integration by the cost minimization opportunities (e.g. more alternatives

of supplier of raw materials and the free flow of labor and skills).

1.2 THE PROBLEM

1.2.1 Statement of the Problem

The purpose of this study was to examine the financial management processes of

selected micro and small entities of the printing press industry players in order to propose

a financial management framework for micro and small printing press which were

operating within the vicinity of Cebu City. Specifically, this study aimed to:

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 1. Describe the profile of Printing Press industry as to:

1.1 Business organization;

1.2 Capitalization;

1.3 Number of employees

2. Identify the financial activities of Printing Press industry based on:

2.1 Operating activities;

2.2 Investing activities

2.3 Financing activities;

3. Determine financial management practices of the Printing Press industry:

4. Based on findings, the study will propose a financial management framework for

micro and small printing press.

1.2.2 Scope and Limitation

The researchers set the scope of this study to be conducted only on the financial

management process of micro and small printing press players which are engaged in the

said line of business within the vicinity of Cebu City. Likewise, the researchers considered

potential weaknesses in the study that are mostly beyond the control of the researchers

such as, 1) limited funding, 2) choice of research instrument and model, 3) constraints on

data collection and analysis, and 4) other relevant factors.

4
1.2.3 Statement of Assumptions

The researchers believed that there were things that were accepted to be true, or

at least plausible, by then the researchers asserts based on their own intuition,

experiences, and observations the following:

a) The information and data were assumed to be gathered from honest and truthful

responses

b) The respondents were assumed to be engaged in the printing press business

c) Not all of the entities under the printing press industry were implementing financial

management system

d) The non-application of single economic entity concept or personal transactions of

owners were sometimes included with the business transactions

1.2.5 Significance of the Study

This study identified basic problems existing in the printing press industry of micro

and small enterprises and suggest available methodologies that will solve and improve

the effectiveness and efficiency of financial management practices currently being applied

by the entity. The following users will benefit from this study:

1) Entrepreneurs - The results of this study will help entrepreneurs in adopting

and implementing sound management policies and activities concerned with planning for

and controlling its own financial resources which are both effective for micro and small

enterprises engaged in the Printing Industry.

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 2) Students - The result of the study will help students in learning the application

of financial management in micro and small enterprises engaged in Printing Industry and

to provide an outlook on the operations of entities under this type of industry.

3) Investors - This study will provide investors with an insight to invest in Printing

Services and to determine the profitability of their investments as well as the cost-benefit

of engaging in the business of Printing Industries.

4) Customers - This study will be useful in providing consumers of this industry

the means to assess the quality of the services that they are paying for as well as an

understanding of the Printing Industrys operational activities.

5) Educational Entities - Some school provides their own printing services but

this study will serve as the benchmark for setting up affordable prices.

6) Companies - In the corporate world, everyone needs printed-out documents.

This will determine whether a company should supply its own printing machines or make

contracts with existing printing presses. Disadvantages and advantages will be

considered in studying capital budgeting for printing machines. This research will provide

a base of comparison under the cost-benefit principle.

7) Future Researchers - This study may serve as a basis for researchers working

in the same research field. This may also be used as reference for a more isolated study

on the topic at hand and improve the conclusions reached by the study. Moreover, this

study may help them uncover critical issues that other researchers were not able to

explore.

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1.4 DEFINITION OF TERMS

This study uses words/ terms/ phrases that are different from laymans parlance.

The researchers provided the following:

1) Financial Management It refers to the sound management of resources of

an entity such as money in such a manner as to accomplish the objectives of that entity.

2) Printing Materials This encompasses the items used in the process of

printing ranging from various types of paper, ink and printing equipment. Printing

materials also include newsprint, printing/writing materials, corrugated materials

(linerboard and fluting), tissue paper, cartonboard, sack paper and kraft/wrapping

products.

3) Printing Press Industry This refers to the industry of commercially

reproducing text and images using a master form or template and storing the reproduced

material into paper such as books, photocopies, pamphlets, magazines, etc. The printing

press industry encompasses entities rendering: photocopy and riso, document and piso

print, bookbindery, tarpaulin and shirt printing.

4) Printing Services This refers to the production of newspapers, magazines,

and books, brochures, labels, newsletters, postcards, memo pads, business order forms,

checks, maps, T-shirts as well as services such as embossing, binding, finishing, and

prepress services as well.

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 CHAPTER 2
THEORETICAL BACKGROUND

2.1 REVIEW OF RELATED LITERATURE

2.1.1 MSMEs

Definition

In the Philippine setting, small and medium sized entities (SMEs) are defined by

the Philippine Securities and Exchange Commission as entities with total assets between

Php 3,000,000 and Php 350,000,000, or with total liabilities between Php3,000,000 and

Php250,000,000.

In addition, under the Philippine jurisdiction the micro, small and medium

enterprises (MSMEs) refers to any business activity/ enterprise engaged in industry, agri-

business/services, whether single proprietorship, cooperative, partnership, or corporation

whose total assets as well as number of employees fall according to the following

categories (Samar, n.d.)

1. By asset size:

- Micro: Up to Php 3,000,000 (about US$60,000)

- Small: Php3,000,001 - Php15,000,000

- Medium: Php15,000,001 - Php100,000,000

- Large: above Php100,000,000 (>US$2,000,000)

2. By number of employees:

- Micro: 1 - 9 employees

- Small: 10 -- 99 employees

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 - Medium: 100 -- 199 employees

- Large: More than 200 employees

In addition, these entities are not required to file financial statements under SRC

Rule 68.1 (pertains to listed entities or entities whose securities are traded in an

exchange market, and entities with assets of at least Php50,000,000 and have 200 or

more holders each holding at least 100 shares of a class of equity securities).

Furthermore, these are entities not in the process of filing financial statements for

the purpose of issuing any class of instruments in a public market and are not holders of

secondary licenses issued by a regulatory agency such as a bank, investment house,

finance company, insurance company, etc. These entities must not fall under public

utilities as well. (Valix et al, 2013)

In a report prepared by the Organisation for Economic Co-Operation and

Development (OECD) - Secretariat (2004), MSMEs are found in a wide array of business

activities, ranging from the single artisan producing agricultural implements for the village

market, the coffee shop at the corner, the internet caf in a small town to a small

sophisticated engineering or software firm selling in overseas markets and medium-sized

automotive parts manufacturer selling to multinational automakers in the domestic and

foreign markets.

The owners may or may not be poor; the firms operate in very different markets

(urban, rural, local, national, regional and international); embody different levels of skills,

capital, sophistication and growth orientation, and may be in the formal or the informal

economy.

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 MSMEs are different from large scale enterprises in three main aspects;

uncertainty, innovation and evolution. The SME sector itself can be classified into micro

enterprises, small enterprises and medium enterprises. MSMEs are the starting point of

development in the economies towards industrialization. (Jasra, Khan, Hunjra, Rehman,

Azam, 2011)

Furthermore, statistical definition of MSMEs varies by country and is usually based

on the number of employees, and value of sales and/or value of assets. Due to its ease

of collection, the most commonly used variable is the number of employees. The

European Union, transition and developing countries set the upper limit of number of

employee in the MSMEs between 200-250, with a few exceptions such as Japan (300

employees) and the USA (500 employees).

Until January 1996, the small and medium enterprises were considered those

enterprises whose total number of employees is less than 500 people. This type of

definition was established strictly on a single criterion that is the number of people

employed in the enterprises.

Also, the European Commission established a new definition of small and medium

enterprises based on four quantitative criteria: total number of employees, annual volume

of turnover, total of the assets in the enterprise balance, degree of independence of the

enterprise or the ownership over it. (Savlovschi, Robu, n.d., pg. 1)

According to the State Bank of Pakistan, Small and medium enterprises (MSMEs) are

those enterprises that employ not more than 250 employees and work on small scale.

The technical definition varies from country to country but is usually based on

10
employment, assets, or a combination of the two. (Jasra, Khan, Hunjra, Rehman, Azam,

2011)

In conclusion, Gibson and van der Vaart (2008) consider the current multiplicity of

SME definitions and deem it clear that MSMEs are more meaningfully defined by their

functional and behavioral attributes than by quantifications of employees, assets as well

as turnover as it most closely reflects functional and behavioral attributes.

Importance and Roles of MSMEs in the Economy

MSMEs are considered the launchers of new ideas and assemblage of new

processes accelerating the increase of these based on effective use of resources. They

serve as engines for economic growth as the statistics in almost all countries show that

MSMEs are absolutely predominant in the economy, having substantial influence on

obtaining the gross domestic product and the supply of jobs.

Two-thirds of the newly created jobs are owed to the small and medium sector.

The costs associated in the creation of a job in a small or medium enterprise are reduced

compared to the ones involved in larger enterprises. The main factors determining this

difference are the lower expenses involved and a higher work productivity under the

circumstances of the permanent presence of the entrepreneur in the company.

In the conditions of an economic environment in a state of permanent change, the

MSMEs are flexible and they have a great capacity of adjustment, encouraged by the low

dimensions and the fast decisional process. They adapt easily to the requirements and

demands of the consumers, being closer to the market. They also generate to a greater

extent, the technical innovation applicable in the economy. Many of the jobs will come

11
from the innovation and the new discoveries will bring about new entrepreneurial

adventures. (Savlovschi, Robu, n.d., pg. 2-3)

Also, MSMEs are of special importance to private sector growth. They are claimed

to be more efficient at creating quality jobs, are more innovative and grow faster than

larger firms on the basis of large regression analyses and on the basis of examining

company registrations and corporate failures. (Gibson, van der Vaart, 2008)

MSMEs have their significant effect on the income distribution, tax revenue, and

employment, efficient utilization of resources and stability of family income. MSMEs have

the capability to employ more labor-intensive production processes than large

enterprises.

Consequently, they contribute significantly to the provision of productive

employment opportunities, the generation of income and eventually, the reduction of

poverty. MSMEs play a significant contribution in the transition of agriculture-led

economies to industrial ones furnishing plain opportunities for processing activities which

can generate sustainable source of revenue and enhance the development process.

MSMEs shore up the expansion of systemic productive capability (Jasra, Khan, Hunjra,

Rehman, Azam, 2011).

With reference to Indonesia and Thailand, MSMEs are widely scattered throughout

the rural areas, therefore they have a special local significance for the rural economy.

They create both employment opportunities and means for income generation.

(Tambunan, 2008)

In the Philippines, MSMEs play a major role in the countrys economic

development through their contributions in rural industrialization, rural development and

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decentralization of industries, creation of employment opportunities, use of indigenous

resources, earning of foreign exchange resources, creation of linkages (forward and

backward) with existing industries and entrepreneurial development.

They are also vital in dispersing new industries to the countryside and providing

gainful employment. MSMEs generate jobs in the locality of operation and bring about a

more balance growth and equity in income distribution. MSMES contribute in setting new

design trends, developing contemporary products and bringing them to the marketplace

ahead of the competition. They become channels for innovation to develop indigenous or

appropriate technology or appropriate technology.

MSMEs are agents for effective increase of the value added in final goods that are

processed and marketed by large manufacturing firms. They promote maximization in the

use of scarce capital resources and are able to partner with large firms by supplying

locally available raw materials in unprocessed or semi-processed forms. They contribute

to regional development programs, the development of entrepreneurial skills and

provision of services to the community. (Samar, n.d., pg. 3-4)

Difficulties, Limitations and Constraints faced by MSMEs

The common constraints face by MSMEs fall on capital, raw materials, relevant

business information, marketing and distribution, technological capabilities,

transportation, communication, bureaucratic procedures such as licenses, policies and

regulations. (Tambunan, 2008)

Financial resources are of vital importance for a business to run operations

profitably. SMEs have comparatively limited resources and greater difficulty in accessing

13
funding sources, are more dependent on a single product, have less adequate budget

control systems and lack economies of scale. (Jasra, Khan, Hunjra, Rehman, Azam)

Poverty is also an issue for some MSMEs as it can affect the quality of their inputs,

including human capital, and their state of technology (Lanzona, 2015). In a report

prepared by the Organisation for Economic Co-Operation and Development (OECD) -

Secretariat (2004), the majority of MSMEs in developing and transition countries, are

unable to exploit the benefits and globalization and are frequently under the pressure on

the local or domestic markets from cheaper imports and foreign competition.

MSMEs, due to their size, are particularly constrained by non-competitive real

exchange rates, limited access to finance, cumbersome bureaucratic procedures in

setting up, operating and growing a business, poor state of infrastructure and lack of

effective institutional structures.

In the Philippine setting, the SME sector in the country is hampered by low

productivity, constraints in terms of funding sources, limitations of market access and

inability to adequately provide support parts and supplies to large domestic firms and

Multinational Corporations forcing them to become dependent on imported sources

instead.

Furthermore, MSMEs in the Philippines have smaller assets and operational

capability, cumbersome trade procedures and costly requirements that prohibit them from

actively pursuing international trade. In relation with this data, the Philippines has higher

per unit costs of trade, longer expected trading times and require a large amount of

documentation (Macasaquit, 2009).

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 In addition, the Philippines experiences of recent typhoons expose MSMEs to

risks and vulnerabilities that are difficult to map out considering the wide coverage of

businesses. Water-based industries and those situated along coastlines would be

affected by sea level rising due to climate change. Similarly, Agri-based businesses are

likely to be affected by typhoon, drought, land degradation and flooding. (Samar, n.d., pg.

13)

Aldaba (2012) states that Philippine MSMEs, particularly smaller ones, find

difficulty in accessing funds due to limited track records, limited acceptable collaterals and

inadequate financial statements and business plans. Financial requests by these firms

are turned down due to poor credit history, insufficient sales, income or cash flow as

instability of business type.

This in turn puts lack of access to financing as one of the major constraints of

Philippine MSMEs that adversely affects their performance and competitiveness. This

implies that a substantial number of MSMEs cannot obtain financing from banks and other

sources in order to start, innovate, grow and develop their enterprises. Finance is a critical

factor to the ability to participate in global economy and opportunities arising from regional

integration as well.

Recommendations, Improvements, Developments for MSMEs

To promote the growth of a greater percentage of the universe of MSMEs into new

large firms in any given country, SME development policies have to be enacted to focus

on mechanisms to improve SME access to long term finance. SME policies must seek to

accelerate growth in the SME Sector by specifically targeting expansion financing which

15
would allow MSMEs more leeway in the furtherance and sustenance of their growth.

(Gibson, van der Vaart, 2008)

The Organisation for Economic Co-Operation and Development (OECD) -

Secretariat (2004) provides an insight on the access to finance as essential for improving

SME competitiveness, as MSMEs have to invest in new technologies, skills and

innovation. Also, MSMEs are recommended to implement sound business practices and

continuously invest in good internal management systems: in accounting, planning,

financial, operations and human resource management.

Aldaba (2012) comments on the access to finance as a critical factor affecting the

competitiveness of MSMEs in the Philippines and suggests policy recommendations such

as mechanisms to improve overall availability of credit for MSMEs, changing the mindsets

of banks and encourage non-traditional

It is also highlighted that government support plays a vital role in the development

of MSMEs by providing favorable environments and policies such as ease in securing

regulations, permits and licenses as well as specific programs catered to SME

management and entrepreneurship. Furthermore, MSMEs are to practice innovation and

creativity in the delivery of their products and services, as well as adapt to new

technological systems in their business. (Jasra, Khan, Hunjra, Rehman, Azam, 2011)

Government policies on the SME can be classified into two, namely, the promotion

of development of local industries and the enhancement of assistance in infrastructure,

technology, SME promotion, support industries. Both approaches are crucial in the

development of the MSMEs. The government can foster industries that are economically

16
desirable and address the productivity and structural limitations faced by MSMEs.

(Lanzona, 2015)

In the Philippines, SME development has been highlighted in various government

strategies including the Philippine SME Development Strategy, the Philippine Export Plan

and the Philippine Development Plan. There are also a number of laws instituted by the

Philippine government for the improvement of the MSMEs such as R.A. 7459 (1992):

Investors and Invention Incentives Act, R.A. 6977 (1991) amended by R.A. 8289 (1997):

Carta for Small Enterprises, R.A. 9178: Barangay Micro Business Enterprises (BMBEs)

Act of 2002 and E.O. 176 (2003): Institutionalizing the Isang Bayan, Isang Produkto,

Isang Milyong Piso Program.

2.1.2 FINANCIAL MANAGEMENT

Definition of Financial Management

Financial Management is defined as planning, organizing, directing and controlling

the financial activities such as procurement and utilization of funds of the enterprise. It

means applying general management principles to financial resources of the enterprise

(Managementstudyguide.com 2015).

Finkler (2010) stated that Financial Management is the subset of management that

focuses on generating financial information that can be used to improve decision making.

Whereas according to Paramasivan and Submarasivan (2009), Financial Management is

mainly concerned with the effective funds management in the business. In simple words,

Financial Management as practiced by business firms can be called as Corporation

Finance or Business Finance.

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 As stated in Hubpages.com (2011), Financial Management is the scientific

manipulation and exploitation of our business and financial environment, using a range

of statistical, mathematical, and economics tools, with the aim of making the best

economic decision, under prevailing circumstances and availability of information and

scarce resources. Simply put, financial management is an intelligent quest for optimal use

of financial and other economic resources at our disposal.

To simply put, Financial Management is all about on effective use of funds and

resources in business. This focuses on financial side to generate financial information

that is useful in decision making.

Importance of Financial Management

Defined by Hubpages.com (2011), financial management is important in: 1)

economic growth and development: through investing decision, financing decision, and

risk management decision. The resultant effect on the economy is economic growth and

development; 2) improved standard of living: growth and development in the economy

that is brought about by financial management will ultimately translate into improved

standard of living for all; 3) improved health: good economic condition and improved

standard of living culminates into improved health as a lot of financial stress related

sicknesses will be completely eliminated or reasonably reduced; 4) allows for better

financial decision; 5) creates jobs those that teach financial management and the jobs

that are created as a result of flourishing economy. Better financial decisions will lead to

profitability which will eventually lead to expansion and in turn mean more jobs; 6)

alleviation of poverty; 7) reserve our environment; and 8) promotes efficiency: good

18
financial management does not give room for wastes and inefficiencies that characterizes

poor financial management and decision making.

The importance of financial management can take us a whole lot of space to finish

listing. This is to say that the once listed above are just but few. Kumar (2010) stated that

Financial Management is very significant because it is related to funds of company.

Financial management guides to finance manager to make optimum position of funds.

Role of Financial Management

According to Bass, an organizations financial management plays a critical role in

the financial success of a business. Therefore, an organization should consider financial

management a key component of the general management of the organization. Financial

management includes the tactical and strategic goals related to the financial resources of

the business. Some of the specific roles included in financial management systems

include accounting, bookkeeping, accounts payable and receivable, investment

opportunities and risk.

Managementstudyguide.com stated that financial activities of a firm is one of the

most important and complex activities of a firm. Therefore, in order to take care of these

activities a financial manager performs all the requisite financial activities.

A financial manager is a person who takes care of all the important financial

functions of an organization. The person in charge should maintain a far sightedness in

order to ensure that the funds are utilized in the most efficient manner. His actions directly

affect the Profitability, growth and goodwill of the firm. The main functions of a Financial

19
Manager are 1) Raising of Funds, 2) Allocation of Funds, 3) Profit Planning, and 4)

Understanding Capital Markets.

Objectives of Financial Management

Managementstudyguide.com (2015) stated that the financial management is

generally concerned with procurement, allocation and control of financial resources of a

concern. The objectives can be 1) to ensure regular and adequate supply of funds to the

concern, 2) to ensure adequate returns to the shareholders which will depend upon the -

earning capacity, market price of the share, expectations of the shareholders, 3) to ensure

optimum funds utilization. Once the funds are procured, they should be utilized in

maximum possible way at least cost, 4) to ensure safety on investment, i.e., funds should

be invested in safe ventures so that adequate rate of return can be achieved and 5) to

plan a sound capital structure-There should be sound and fair composition of capital so

that a balance is maintained between debt and equity capital.

Major Financial Management Decisions

Pujari (2015) stated that some of the important functions which every finance

manager has to take are as follows: 1) Investment decision, 2) Financing decision and 3)

Dividend decision.

Investment Decision (Capital Budgeting Decision) relates to careful selection of

assets in which funds will be invested by the firms. A firm has to select the most

appropriate investment which will bring maximum benefit and deciding or selecting most

appropriate proposal is investment decision.

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 Capital budgeting decisions can turn the fortune of a company. The capital

budgeting decisions are considered very important because of the following

reasons, Long Term Growth, Large Amount of Funds Involved, Risk Involved, and

Irreversible Decision. Deciding how much to raise from which source is concern of

financing decision. Mainly sources of finance can be divided into two categories: 1)

Owners fund and 2) Borrowed fund.

There are advantages and disadvantages of different sources of finance. The

borrowed funds have to be paid back and involve some degree of risk whereas in owners

fund there is no fix commitment of repayment and there is no risk involved. The factors

affecting financing decisions includes: 1) Cost, 2) Risk, 3) Cash Flow Position, 4) Control

Considerations, 5) Floatation Cost, 6) Fixed Operating Cost, and 7) State of Capital

Market.

The dividend decision is concerned with distribution of surplus funds. The profit of

the firm is distributed among various parties such as creditors, employees, debenture

holders, shareholders, etc. This decision is also called residual decision because it is

concerned with distribution of residual or left over income.

2.1.3 FINANCIAL MANAGEMENT PRACTICES

Financial Management Practices in general is a major tool in improving business

performance. It impacts the profitability of business operations provided by the entities.

As thoroughly discussed by Jain, P.K., Singh, Shveta, Yadav, Surendra Singh (2013),

Financial management practices are likely to have a marked effect on the financial

performance of a corporate enterprise. Therefore, sound financial decisions/practices can

21
contribute towards meeting the desired objective of having profitable operations. This

subject assumes paramount significance in view of the present dynamic and turbulent

business environment, which has produced more intense competition and smaller profit

margins across the world.

Role and Significance of Practitioners of Financial Management

Luckyboy Samuel Mathibas, Evaluation of Financial Management Practices in

the Department of Correctional Services (2011), approach to Financial Management

Practices elaborated the practitioners of Financial Management. Financial management

practices are defined and demarcated as the practices performed by the accounting

officer, chief financial officer and other managers in the areas of budgeting, supply chain

management, movable asset management and control.

The accounting officers are heads of departments, and they account personally for

financial transactions. The concepts of budget processes and planning are explored in

order to identify normative requirements. Budget is identified as part of organizational

planning, which starts with the aim and the mission of the institution. Control is defined

as a process through which a manager ensures that activities are carried out as

originally planned. According to Gildenhuys (1997:137), equipment is called movable

assets and this category of assets are obtained and created to be utilized for a number

of years as instruments for delivering services. With regard to control, in order to comply

with financial management policies, an official in a department must ensure that the

system of financial management and internal control established for that department

is carried out within the area of responsibility of that official.

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Areas of Financial Management Practices

Business entities around the world vary in view of their financial management. In

Pakistan, the Pakistani corporate sector have identified several areas of Financial

Management practices as written by Babar Zaheer Butt, Ahmed Imran Hunjra and Kashif-

Ur-Rehman to their article, Financial Management Practices and Their Impact on

Organizational Performance (2010): This study measures the relationship between

organizational performance and financial management practices like capital structure

decision, dividend policy, investment appraisal techniques, working capital management

and financial performance assessment. In another scholastic article entitled, Financial

management and profitability of small and medium enterprises by Kieu Minh N guyen

(2001), the areas of Financial Management Practices of MSMEs, have been studied

particularly in Australia, UK and USA by McMahon, Holmes, Hutchinson and Forsaith

(1993) and McMahon (1998) as follows: In their review the context of financial

management practices includes the following areas: 1) Accounting information systems,

2) Financial reporting and analysis, 3) Working capital management, 4) Financial

structure management, 5) Financial planning and control, 6) Financial advice, 7) Financial

management expertise and 8) Cash Flow Management. But the focus of this study is the

management of cash flows and how it affects to the overall success of the entity.

Cash Flows Activities

Understanding Cash Flows is a comprehensive study that has to be absorbed by

the management and practitioners so as to prepare the statement of Cash Flows. Cash

flow is the most viable source of information for managers, and its interpretation is one

23
of the most important objectives of the management team to acquire the desired

efficiency (Florentina-Simona). According to extension.iastate.edu, a cash flow statement

is a listing of the flows of cash into and out of the business or project.

As stated by Hertenstein and McKinnon (1997) in their article Solving the Puzzle

of the Cash Flow Statement, cash flow statement is one of the most useful financial

statements companies prepare. When analyzed in a rational, logical manner, it can

illuminate a treasure trove of clues as to how a company is balancing its receivables and

payables, paying for its growth, and otherwise managing its flow of funds.

Objective of Cash Flow Activities

The objective of the Statement of Cash Flow Statement is to provide users of

financial statements with details of cash generated or utilized by operations, investing

activities, and financing activities. The traditional income statement and balance sheet

provide limited information regarding the timing and extent of cash flows of an enterprise.

Cash flow statements therefore enable users to form a better assessment of the cash

performance.

The cash flow from operating activities is usually considered the most important

type of cash flow. A company which consistently fails to generate positive cash from

operating activities is likely to land up financial difficulties. In the long term a satisfactory

return on assets, a healthy capital structure, high dividends and hopefully a reasonable

rating in the market result from a positive cash flow from operating activities. (Hamman)

The following uses as enumerated by Paramasivan and Subramanian in their book

Financial Management are indicated below:

24
 1. Cash flow statement is the report showing sources and uses of cash.

2. Cash Flow Statement explains the inflow and outflow of cash during the

particular period.

3. The main objective of the cash flow statement is to show the causes of changes

in between two balance sheet dates.

4. Cash flow statement indicates the factors contributing to the reduction of cash

balance in spite of increase in profit and vice-versa.

5. In a cash flow statement only cash receipt and payments are recorded.

6. Cash flow statement starts with opening cash balance and ends with closing

cash balance.

The Purpose of Statement of Cash Flows

The statement of cash flows, as its name implies, summarizes a companys cash

flows for a period of time. The statement of cash flows explains how a companys cash

was generated during the period and how that cash was used. Even if the statement of

cash flows seems to be a replacement for the income statement, the two statements have

two different objectives.

The income statement measures the results of operations for a period of time. Net

income is the accountants best estimate at reflecting a companys economic

performance for a period. The income statement provides details as to how the retained

earnings account changes during a period and ties together, in part, the owners equity

section of comparative balance sheets.

25
 The statement of cash flows provides details as to how the cash account changed

during a period. The statement of cash flows reports the periods transactions and events

in terms of their impact on cash. Also, this financial statement provides important

information from a cash - basis perspective that complements the income statement and

balance sheet, thus providing a more complete picture of a companys operations and

financial position. It is important to note that the statement of cash flows does not include

any transactions or accounts that are not already reflected in the balance sheet or the

income statement. Rather, the statement of cash flows simply provides information

relating to the cash flow effects of those transactions.

Users of financial statements, particularly investors and creditors, need information

about a companys cash flows in order to evaluate the companys ability to generate

positive net cash flows in the future to meet its obligations and to pay dividends. In some

cases, careful analysis of cash flows can provide early warning of impending financial

problems.

Information Reported In the Statement of Cash Flows

Accounting standards include specific requirements for the reporting of cash flows.

The inflows and outflows of cash must be divided in three main categories, namely

operating activities, investing activities and financing activities. Further, the statement of

cash flows is presented in a manner that reconciles the beginning and ending balances

of cash and cash equivalents. Cash equivalents are short- term, highly liquid investments

that can easily be converted into cash. Generally, only investments with maturities of

26
three months or less qualify as cash equivalents, such as: Treasury bills, money market

funds or commercial paper. (Lucian and Dorel)

What is Working Capital?

Working capital is an important part of a cash flow analysis. It is defined as the

amount of money needed to facilitate business operations and transactions, and is

calculated as current assets (cash or near cash assets) less current liabilities (liabilities

due during the upcoming accounting period). Computing the amount of working capital

gives you a quick analysis of the liquidity of the business over the future accounting

period. If working capital appears to be sufficient, developing a cash flow budget may be

not critical. But if working capital appears to be insufficient, a cash flow budget may

highlight liquidity problems that may occur during the coming year (extension.iastate.edu).

The cash flow statement is divided into three sections: operating activities,

investing activities, and financing activities. Figure 1 presents an example of a simple

cash flow statement with the three sections delineated in bold letters. Each section

showed the cash inflows and outflows associated with that type of activity.

27
Figure 2.1: Statement of Cash Flows (Indirect Method)

28
 Cash flow from operating activities showed the results of cash inflows and

outflows related to the fundamental operations of the basic line or lines of business in

which the company engages. For example, it includes cash receipts from the sale of

goods or services and cash outflows for purchasing inventory and paying rent and taxes.

It does not show these items directly. It assumes that most of these cash inflows and

outflows are already summarized in the Net Income figure, so it starts at that figure and

makes an adjustment for everything that is not a true representation of cash in and out

in net income. This approach is the indirect format of presenting cash flows from

operating activities and is the one chosen by most companies. Regardless of how the

cash flow from operating activities section is formatted, it is important to remember that

this is the most important of the three sections because it describes how cash is being

generated or used by the primary activities of the company.

The next section is called cash flow from investing activities. The cash flows

associated with purchases and sales of non-current assets, such as building and

equipment purchases, or sales of investments or subsidiaries. If the current assets are

associated with operations, then the activities associated with all the rest of the assets

are in this section.

The third section is called cash flow from financing activities. If the current

liabilities associated with operations are eliminate, then the activities of all the rest of the

liabilities and the stockholders equity accounts are summarized here. These are all the

flows associated with financing the firm, everything from selling and paying off bonds to

issuing stock and paying dividends.

29
2.1.4 FINANCIAL MANAGEMENT OF MSMES

Small and medium Enterprises (MSMEs) are seen as a driving force for the

promotion of an economy (Khan and Jawaid, 2004) and they contribute immensely to the

economic development of any country (Abor et al., 2010). In the Philippines, MSMEs

constitute a large portion of the countrys business entities. They contribute a significant

percentage to the countrys GDP. In line with the purpose of this study, it is very crucial

to examine the financial management practices applicable to MSMEs.

Financial management is a broad area of study that includes the planning,

directing, organizing, and controlling of monetary resources of an organization

(BusinessDictionary.com, 2016). This research is going to focus on the operating,

financing, and investing side of MSMEs financial management practices.

As financial management is the centre of the overall management system in a

small business (Meredith, 1986) the effectiveness and efficiencies of financial conduct

have crucial effects on the longevity and performance of an SME.

Financial management in MSMEs is often different to that found in large firms due

to the more dynamic nature of their cash flow cycle, general paucity of working capital

(Welsh and White, 1981), the area of borrowing by small enterprises, lack of long-term

debt finance and different taxation provisions (Irena Jindrichovska 2013). Karadag (2015)

discussed that small and medium-sized companies are faced with a number of challenges

and the problems arising from poor financial management are reported as the major

causes of business failures in MSMEs. Strategic financial management (SFM) which is a

research area that has attracted the interest of researchers after 2010 is one of the key

30
managerial areas of MSMEs, due to its vital role on the survival, growth and performance

of MSMEs.

Jindrichovska 2013 discussed the financial failure of MSMEs which includes a) its

prediction, b) involuntary liquidation and 3) default behaviors of MSMEs and the credit

characteristics of their owners. Some researchers tried to predict small enterprise failure

to mitigate the collapse of small businesses. McNamara et al. (1988) developed a model

to predict small enterprise failures giving the following four reasons: a) management

responses to changing conditions, b) lenders approach of the important factors involved

in determining an enterprises likelihood of failing, c) lending organizations marketing by

identifying their customers financial needs more effectively, and d) credit evaluation

process.

Hall and Young (1991) performed a study of 3 samples of 100 small enterprises

that were subject to financial failure in 1973, 1978 and 1983. The authors have found

that the reasons given for failure were of financial nature in 49.8%. In the study

of perceptions of official receivers interviewed for the same small enterprises, 86.6%

of the 247 reasons given were of a financial nature. The positive correlation between

poor or non-existent financial management (including basic accounting) and business

failure has well been documented in these countries according to Peacock (1985,

2004).

On the other hand, other researchers discussed the growth and development of

MSMEs. The studies of small enterprise growth and development further provide that

certain factors such as size, age, profitability, growth and future growth opportunities,

31
asset structure all seem to have an effect on the level of growth and development in small

firms (Irena Jindrichovska 2013).

The study conducted by Turyahebwa, Sunday and Ssekajugo (2013) supports the

pecking order theory in explaining the financial management practices of MSMEs

together with resource based view as the theories that help in explaining business

performance and activities of MSMEs. Also, the study confirmed efficient financial

management practices factor structure of observed variables and the latent variables. As

a result, the study provided models for efficient financial management practices. In effect,

the owners of MSMEs should develop a positive attitude towards adopting financial

management practices so as to achieve desired business performance.

To understand the context of this study, the members need to identify what are the

missing areas in the financial management practices of MSMEs in the Printing Press

Industry in Cebu City. Karadag (2015) argues that to implement a new effective and

efficient organizational system of small business, one must first identify its defects and

start from there, particularly with respect 1) to external source of financing, 2) to the cost

of producing a product, 3) to other selling and administrative cost and 4) to the effective

and efficient cash management.

A study conducted by Li. He (2010) of MSMEs in China provided situations with

respect to external financing. MSMEs financing issues and condition which is due to

MSMEs' small size, loose internal control, and poor transparency, it is hard for them

winning the trust of banks. Loans from banks can not satisfy MSMEs' needs. Then there

is MSMEs investment problem and condition which purports that MSMEs do not form a

perfect management mechanism and the investment decision-making is mostly in the

32
hands of business owners, which makes the investment process lack of internal

restrains.

In cost control, SME policies for fixed standards and information feedback are

imperfect. MSMEs should establish a consciousness of conservation and reduce

unnecessary expenditure considering self-conditions. By strengthening an overall

budget management, enterprises can identify the main contents of cost control, master

the controllable costs, analyze the cost factors, make the scientific budget, and develop

out a practical cost control index (Xiong, Ya. 2010).

Furthermore, in order to ensure enterprises' normal operation and long-term

development, sufficient cash flow is essential. MSMEs should establish a financial

management idea focusing on cash management, strengthen the management

of budget's composition, implementation, analysis, and evaluation, specify cash budget

project. By this way, enterprises can control the cash flow, guaranteeing the needs for

production and the maximum profits. Besides, enterprises should strengthen the

daily management of accounts receivable and prepayment, comprehensively understand

the customers' abilities to repay debts and credit conditions, make up a scientific and

reasonable debt collection policy, accelerate the recovery of investments, and reduce

bad debts (Li. He 2010).

2.1.4 PRINTING PRESS INDUSTRY

Printing press is a machine that transfers lettering or images by contact with

various forms of inked surface onto paper or similar material fed into it in various ways.

The device is used for printing many copies of a text on paper. In 1440, German inventor

33
Johannes Gutenberg invented a printing press process that, with refinements and

increased mechanization, remained the principal means of printing until the late 20th

century. The inventor's method of printing from movable type, including the use of metal

molds and alloys, a special press, and oil-based inks, allowed for the first time the mass

production of printed books (ideafinder.com)

Characteristics for a company to be considered under Printing Press Industry

The printing and publishing sector manufactures a wide range of products

including stationary, checks, business forms, financial documents, books, newspapers,

and magazines (2001, Dr. Tereso Tullao, Jr. and Mr. Raymund Habaradas).

The three top competing types of businesses in the printing industry are the 1)

commercial printers, 2) clients who own their own equipment and 3) low-price quick

printers. It is expected that the quick printing shop will continue to creatively encroach on

the territories of commercial printing, electronic publishing, graphic design, digital

imaging, mailing and fulfillment services, and document management and distribution.

Quick printers' market strength has been, and will be, offering competitive solutions to

small businesses by bringing big business technology to them. (2001, Tudor)

The printing and publishing industry has three major subsectors classified

according to the products or services they offer. These subsectors are (1) newspapers

and periodicals, (2) books and pamphlets, and (3) commercial and job printing and other

allied industries. (2005, Dolbeck)

34
2.1.6 RELATIONSHIP BETWEEN FINANCIAL MANAGEMENT ACTIVITIES AND

PRINTING PRESS INDUSTRY UNDER MSMES

Problems in the industry

Price Competition (Robert Leckachman 1994), high production costs (Ashwath Raj

Sridharan 2015), and changes in the economic environment are few of the problems

faced by small and medium enterprises (Kenneth James Keller 1993). Ashwath Raj

Sridharan suggests that businesses should be willing to change.

Furthermore, a study made by Jayaraj (2015), MSMEs, including the printing press

business, only focuses on a small area of financial management. He exclaimed that it is

not sufficient to integrate a minimal knowledge of financial management for the

sustainability of the entity. To better understand the business as a whole and decide what

next step should be done means a fully developed financial management scheme should

be implemented.

Financial management is a must for any type of enterprise. Lack of proper financial

management may create problems of various types in business. One major weakness

with regard to financial management in the printing industry is no proper planning of future

finance. They achieve targets without any monthly or annual estimation of expenditure,

income and the expected profits. The future plans of finance are almost invisible in

MSMEs. There are a number of factors for non-availability of financial management in

MSMEs, such as lack of knowledge of systematic book keeping, not having trained

employees for book keeping, not knowing the benefits of maintaining accounts, not having

the ability to keep mental records of customers, and not having a time schedule for

35
business. The small business must ensure strategic cash flows against its needed cash

outflow; this is a function of effective working capital management. In managing the

working capital of a firm, especially the small business, the acute shortage of fund needed

for growth remain a subject of strategic financial management function (Jayaraj 2015).

Other Issues Involving the Printing Press Business

Tyson and Schell (2008) emphasized to not only focus on the financial side of

running a business because there are also Regulations and Laws that a business owner

must comply therein when starting up a business. They suggest to have a full knowledge

of the Regulations and Law in a particularly location because each region implements

different sets of rules and regulation for businesses within their territory. Noncompliance

of such, of course, will negate the purpose of a business.

Solutions to the Problems

MSMEs may implement certain components of financial management. They are

further categorized into core and supplement components. Core components consist of

1) financial planning and control, 2) financial accounting and 3) working capital

management. Whereas, supplement components include 1) financial analysis, 2)

management accounting and 3) capital budgeting.

36
2.2 THEORETICAL FRAMEWORK

MICRO AND SMALL ENTERPRISES IN THE PHILIPPINES

Printing Press Industry

TOTAL ASSETS

Up to P 3,000,000 to
P 3,000,000 P 15,000,000

Micro Small

FINANCIAL MANAGEMENT

Operating Investing Financing

Activities Activities Activities

Figure 2.2 Theoretical Framework

37
 The study is structuralized in accordance with the review of related literature as

shown in figure 2.2. Entities under printing press industry that are classified as micro and

small enterprises are the subject of this study. In order to identify which business category

the enterprise belong, the total assets are determined for compliance requirements with

the standards. The focus on this study will be on financial management of an SME under

printing press industry. Financial management as we comprehend may vary across

industries. To study Financial Management of MSMEs in particular, Cash Flow Activities

is the most common area that comprises most of the financial management of entities

under MSMEs. The establishment of business has to be accounted with capital

investments of the proprietor/s and other form of capital funds e.g. cash loans from

creditors, fixed asset contributions. The starting point of business activities is the

procurement of inventories and supply of current assets to manufacture goods or render

services. As the business generates cash inflows, cash outflows will simultaneously or

follow through the payment of employees wages, payment to suppliers and partial or full

extinguishment of creditors loans. The residual cash inflow will be reinvested to the

business or shared by the owners of the company or in the case of cash outflow, the loss

will be shouldered directly by the owners. Thus, the cycle of cash management is

important to identify the practices of financial management of MSMEs.

38
2.3 CONCEPTUAL FRAMEWORK

PRINTING PRESS INDUSTRY

Micro and Small Enterprises

Selected Printing Press Players in

Cebu City

Examination of the Business

Profile

Cash Flow Activities:

Operating; Investing; Financing

Financial Management Practices

Analysis of Findings and Results

Propose Financial Management

Framework

Figure 2.3 Conceptual Framework

39
 This study is conducted to oversee the service industry specifically in the printing

press subsector. To understand their application and non-application of financial

management practices and how these individual practices are performing, the

researchers has set out questionnaires to randomly selected micro and small printing

entities within Cebu City, and additional short interviews and observation are conducted

to gather the necessary data to create a financial management framework applicable to

their said business organization. From the data gathered, the researcher will now assess

the current status of the printing press towards their financial management practices and

how their practices are contributing to the success or distraught of their current business

performance. Thus, from the analyzed data, a proposed financial management framework

will come in to fruition.

40
 CHAPTER 3

METHODOLOGY

This chapter discusses aspects of the research methodology including research

design, data collection and data analysis methods. The design of the research

methodology is based on the research objective and on the literature discussed on the

theoretical background. The objective of the study is to propose a financial management

framework. The objectives of this chapter are: (1) to justify the studys research

methodology, (2) to explain the research methodology used in the study, and (3) to

demonstrate how research design, and data collection and analysis can be utilized in this

study to answer the research questions.

The research design was geared by using the quantitative method. Quantitative

methods emphasize objective measurements and the statistical, mathematical, or

numerical analysis of data collected through polls, questionnaires, and surveys, or by

manipulating pre-existing statistical data using computational techniques, it focuses on

gathering numerical data and generalizing it across groups of people or to explain a

particular phenomenon (Southern California Library). The selection of the sample, the

sources of data, the procedure in collecting and coding the data, and of variables and

method of data analysis are described below.

3.1 RESEARCH ENVIRONMENT

The proponents of this study had chosen Cebu City as its research environment.

It is a first income class highly urbanized center which holds a great significance to trade,

41
commerce and industry, education as well as social and political activity in the Visayas

Region. It is also an economic center for several industries such as tourism,

transportation, manufacturing, technology as well as business process outsourcing. It

also caters to several multinational companies in various industries as mentioned above.

The proponents of the study selected micro and small printing press industry

players as the focal point of this study. A printing press is a device for applying pressure

to an inked surface resting upon a print medium such as paper or cloth, thereby

transferring the ink. This industry underwent rapid technological development throughout

the years. This facilitated the dissemination and preservation of knowledge in a

standardized form through books and other printed paraphernalia.

The printing press industry involves the commercialized process of reproducing

text and images using a master form or template and storing the reproduced material into

paper such as books, photocopies, etc. As retrieved from Google Maps on January 30,

2016, there are a total of 43 locatable printing presses in operation in Cebu City

Figure 3.1 Cebu City Map

42
3.2 RESEARCH RESPONDENTS

The respondents in this study were the Printing Press industry players in Cebu

City. Printing press is one of the more important industries because of the services it

offers to every organizational structure in terms of documentation and printed

advertisement. The researchers also chose these printing presses because they fell

under the category of Micro and Small enterprises.

List of Printing Presses under the SME Category within Metro Cebu

The researchers had chosen eight (8) printing presses among forty-three (43)

locatable printing presses in operation in Cebu City.

Figure 3.2 Respondents

Printing Press A Printing Press E

Printing Press B Printing Press F
Printing Press C Printing Press G
Printing Press D Printing Press H

43
1) Printing Press A

Printing Press A is Located at Kamagayan St., Cebu City 6000 with telephone

no. (032) 253-5058, it was established on 1975.

2) Printing Press B

Printing Press B, its office address is at Door 15 Sanchez Building, 68

Sanciangko, Cebu City 6000 and telephone no. 032 256 3738. The company was

established since 1965.

3) Printing Press C

Printing Press C is located at 29 P Del Rosario St., Cebu City 6000, one of the

printing stores across University of San Carlos Downtown Campus. The company has

operated for 16 years (2000).

4) Printing Press D

Printing Press D has many branches all over the Philippines. In Cebu, its

branch is in Sanciangko cor. Osmena St., Cebu City 6000. The company first operated

on 1991.

5) Printing Press E

Printing Press E is located at 628 D. Jakosalem Street, corner Bonifacio Street,

Brgy. Kamagayan, Cebu City 6000. The entity was established since 1992.

44
6) Printing Press F

Printing Press F is situated at Sanciangko Street, Cebu City 6000 and was

recently established on October 2014.

7) Printing Press G

The company is located at 33 Sanciangko Street, Cebu City and had operated

for 5 years (2011).

8) Printing Press H

The printing press is located at Sanciangko Street, Cebu City 6000. The

company was established last January 2012.

3.3 RESEARCH INSTRUMENTS

The researchers had established a defined tool in obtaining data from respondents

through questionnaires associated with minimal personal interviews when the

researchers considered it necessary. The questionnaire prepared was inclined with the

development of Financial Management Practices performed by micro and small printing

press industry players. This provided the required data in fulfillment of this study. To

achieve this objective, the researchers interacted and conveyed ideas to help the

respondents analyze the questions.

The questionnaire was structured in such a way that respondents will be able to

answer it easily. Majority of the questions were outlined as checklist which will ease and

expedite the respondent. The questionnaire consisted of four parts as shown in Appendix

45
B-1. The first part came with the business background which will be used to determine

the businesss location and existence. The second part comprised of questions on

company profile which includes its organization, category, capitalization and number of

employees. The respondent should only choose one choice among the choices on part

two. The third part focused on the activities provided by the industry as a whole, it is

further subdivided into operating, investing and financing activities whether the business

performs a part of the activities provided or not. The questions were categorized in an

orderly manner with the aim of covering the general but necessary financial management

activities being performed by the entity. The respondent may choose all the activities

performed and supporting query such as cash or credit were added on some

questions. The fourth part encompassed the specific business activities which (1) support

the general activities outlined on part three and (2) specific information for a more

comprehensive understanding of the business. The fifth part indicated other financial

management practices not covered in part one to four. This part is answerable by yes

or no. The respondent, at his own discretion may give additional information which are

not covered by questionnaire. The information gathered from these printing press will be

kept confidential. This helped the researchers in verifying the respondents answers in

response to the level of agreement in the Financial Management practices provided.

3.4 RESEARCH PROCEDURES

3.4.1 Gathering of Data

The research procedure of this study used primary data. Primary data are data

that were previously unknown and which have been obtained directly by the researcher

46
for a particular research project (Currie, 2005). This research gathered the

aforementioned with a questionnaire. These questionnaires served as a tool in identifying

the:

a) Business basic profile (e.g. name, location, etc.)

b) Financial management activities (e.g. operating, financing, investing)

c) And overall status of the business

The questionnaire was distributed to managers, owners, or those who have

knowledge or who are in charge of the business operations of printing presses. The

researchers may opt to an interview if there is insufficiency with the data collected in the

questionnaire or if there are some clarifications that need to be further investigated.

3.4.2 Treatment of Data

The data obtained from the questionnaires and interview were collected, tallied

and analyzed to identify and assess the financial management practices of the

respondents. These data from part one to part five of the questionnaire were collected

and tallied. The data were analyzed using frequency/ frequency tables. These tables

show the possible responses, the total number of respondents for each part, and the

percentages of respondents who selected each answer. Frequency tables are useful

when a large number of response options are available, or the differences between the

percentages of each option are small. In most cases, pie or bar charts are easier to work

with than frequency tables.

47
 CHAPTER 4

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

This chapter presents descriptive findings of the selected micro and small printing

press industry players in accordance with their business profile, financial management

practices and activities. Objectives of this chapter are (1) to provide linkage of the

research objectives, the procedure laid out in the methodology and the data acquired, (2)

to systematically analyze and present the findings of the research study, and (3) to

interpret significance of these findings as results of data analysis.

4.1 LINKAGE OF THE RESEARCH OBJECTIVES, RESEARCH PROCEDURES

AND DATA

The results of data analysis and findings presented in this chapter are linked to the

research questions and research objectives. Firstly, descriptive findings of the research

study include findings of micro and small printing press industry players according to its

business background and profile, and its financial management activities and practices.

These findings are linked to the objective of developing and proposing a financial

management framework. The research methodology presented aspects including

research design, data collection, and data analysis methods as support for the proposed

financial management framework.

48
4.2 PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

Investigating financial management practices and financial characteristics of

printing presses is one of the objectives of this research study. This section presents

descriptive findings of the research study, which are linked to the objective of describing

financial management practices and financial characteristics of micro and small printing

press industry players in Cebu City. The data gathering was made through questionnaire

and interview and subsequently analyzed through frequency table having a total of 8

respondents.

Each table was given a table number, title of the table and total number of

population. The presentation of the table was further subdivided into an analysis of micro

and small enterprises which comprises of five and three respondents respectively. The

frequency was tallied from the questionnaire and the percentage was made using the

total number of respondents falling under the micro and small category.

4.2.1 Descriptive Findings on Business Profile

Under the Philippine jurisdiction the micro and small enterprises refers to any

business activity/ enterprise engaged in industry, agri-business/services, whether single

proprietorship, cooperative, partnership, or corporation (Samar, n.d.). The table 4.1 the

next page presents the business profiles of the respondents with regards to business

organization, business category, capitalization and number of employees.

The respondents are composed of five micro and three small entities. For micro

entities, all of the respondents are sole proprietor. Given the nature of their capital of up

to three million pesos, it is but just to establish it in a sole proprietary business

49
organization, as it entails only a minimum supervision, with personnel ranging from one

to nine.

Small entities are bigger in capitalization as oppose to micro entities for their

capitalization ranges from three million and one pesos to fifteen million pesos. One of the

respondents identified itself to be a corporation. Given the size of its capitalization,

establishing the business in to a corporation is reasonable because obtaining such

capitalization is difficult by only one person who has limited assets. In a corporation, this

composed a minimum of five members and a maximum of 15 members, if it is a publicly

listed corporation, or 20, if it is a closed corporation (Section 10 and 96, Corporation Code

of the Philippines). This consolidation of invested capital from the stockholders or owners

helps minimize the losses or risk of their investment as oppose to going in to a sole

propriety business organization, where an individual invest a big portion of his personal

asset. Based from the gathered data, the employees of its nature ranges from nine to 99

employees. The rationale behind this is that there is more equipment to handle and more

volume of sales transactions that are needed to be processed, thus creating a need for

more employees.

50
 Table 4.1
Business Profile
N=8
MICRO SMALL
N=5 N=3
FR % FR %
Business Organization
Sole Proprietorship 5 100% 2 66.67%
Corporation 0 0% 1 33.33%

Capitalization
Up to 3,000,000 5 100% 0 0%
3,000,001 to 15, 000,000 0 0% 3 100%

Number of Employees
1 9 employees 4 80% 1 33.33%
10 99 employees 1 20% 2 66.67

4.2.2 Descriptive Findings on Operating Activities

The following tables presented the activities performed by the respondents under

operating aspect of the cash flow activities. Operating activities are subdivided into sales

cycle, purchases cycle, disbursement cycle and inventory management.

Operating Activities Sales Cycle

One of the practices in attracting customers employed by businesses is extending

credit. As provided in table 4.2, three out of five from the micro respondents and two out

of three from the small respondents or majority of the respondents applied both cash and

credit. However, there is a downside of extending credit to its customer, which is the risk

of non-payment, to which two out of five respondents from the micro and one out of three

respondents from the small agreed to. To avoid this risk, three out of eight respondents

from both micro and small entities accept only cash sales. Another way of attracting and

51
maintaining current customers adapted by industries is giving out privileges on sales.

Trade discounts, discount on sales, and giving away freebies and gifts are just some of

the privileges on sales handed out by the respondents.

To minimize the risk of non-payment from the credit sales, entities created a credit

policy wherein it sets a quasi-due-date to which a customer must pay the liability extended

by the business. This credit policy allows the customer to have the flexibility to acquire

the fund to pay for the liability, as some use payments from their own debtors instead of

using their currently held cash, for this can be used in other investments. Additionally, this

credit policy allows customers to use the discount period, which is usually at two percent

when liabilities are settled within ten or 15 days from the date the service is rendered or

given to the customer.

According to Valix (2013), entities recognize doubtful accounts as a result of the

risk in doing business. This is a form of loss of doing business on credit. To somehow

recover from this loss, the respondents account for this provision to minimize the tax paid

for the period where they recognize such provision.

52
 Table 4.2
Operating Activities Sales Cycle
N=8
MICRO SMALL
N=5 N=3
FR % FR %
Renders printing services for cash 5 100% 3 100%
Renders printing services on account 3 60% 2 66.67%
Renders other than printing services for cash 3 60% 2 66.67%
Renders other than printing services on account 1 20% 1 33.33%
Offers privileges on sale 4 80% 3 100%
Maintains credit term policy for sales on credit 1 20% 2 66.67%
Checks customer credit standing 2 40% 2 66.67%
Provides allowance for sales return 0 0% 1 33.33%
Collects accounts receivable 4 80% 3 100%
Provides allowance for doubtful accounts 1 20% 1 33.33%
Customers can choose to pay before or after rendering of services 2 40% 3 100%
Extend payment period to customers who couldnt pay on time 3 60% 3 100%

Operating Activities Purchases Cycle

Table 4.3 presented the operating activities specifically on purchasing cycle. Two

of the micro enterprise respondents purchased purely on cash and three of them

purchased both on cash and account. All of the small enterprise respondents purchased

on account but only two of them preferred to pay on cash.

Supplies and materials are mostly purchased from more than one suppliers. It is

important to obtain more than one supplier because there could be instances that could

hinder the delivery of goods and also for availability of goods, in case one supplier does

not have the particular goods, they can still choose the other supplier who have that

particular good to deliver it to them.

Only two of the micro and small enterprise respondents enjoy privileges such as

trade discounts, cash discounts and credit discounts. Printing press, as much as possible,

53
try to avail purchase discounts especially on cash discounts on cash purchases to

minimize the purchase cost.

Credit term policy is also offered by the suppliers but for micro enterprise

respondents, only three of them availed and for the small enterprise respondents, only

two availed. This showed that most the respondents want to purchase on credit with terms

2/10, n/30 for them to settle their dues within the short time of discount period.

Table 4.3
Operating Activities Purchases Cycle
N=8
MICRO SMALL
N=5 N=3
FR % FR %
Purchases of supplies and materials for cash 5 100% 2 66.67%
Purchases of supplies and materials on account 3 60% 3 100%
Enjoys privileges on purchases 2 40% 2 66.67%
Maintains credit term policy for purchases on credit 3 60% 2 66.67%

Operating Activities Disbursements Cycle

Table 4.4 depicted the common cash disbursements of a micro and small entity.

Thus, payment of liabilities to creditors and suppliers are essentially done by all of the

respondents within the time period. This showed that most of the printing press industries

paid their debts within the discount period and within the credit period to prevent incurring

interest or penalties which is unfavorable for the printing press.

Respondents, who purchased on account, also paid on a timely basis within the

discount period because of the incentive or discount availed. Printing press, as much as

possible, try to avail purchase discounts especially on cash discounts on cash purchases

to minimize the purchase cost.

54
 Utilities are otherwise incurred by these entities and paid in cash. Utilities are

necessary expenses in conducting the business operations even though they are not

directly related with the products or services. Thus, it is only understandable that entities

normally incur and pay utilities.

Table 4.4
Operating Activities Disbursements Cycle
N=8
MICRO SMALL
N=5 N=3
FR % FR %
Payment of liabilities to creditors and suppliers 3 60% 3 100%
Pay credit purchases on time 3 60% 3 100%
Incurs utilities 5 100% 3 100%
Pays utilities 5 100% 3 100%

Operating Activities Inventory Management

Table 4.5 showed that all respondents, whether Micro or Small entities, have a

system of maintaining and replenishing inventory of supplies and materials. And in

inventory costing, one respondent answered from Micro and two respondents from Small

entities. In the inventory system and costing method of the respondents, one from Micro

used periodic and FIFO method and two respondents from Small also used periodic and

FIFO method respectively. When it comes to inventory replenishment, four from Micro

and two from Small entities answered that they replenish inventory when the need arises.

In a practical world, it shows that having excess materials especially for Micro and Small

businesses engaged in printing services is not encouraged.

55
 Table 4.5
Operating Activities Inventory Management
N=8
MICRO SMALL
N=5 N=3
FR % FR %
Maintains inventory of supplies and materials 5 100% 3 100%
Replenishes inventory of supplies and materials 5 100% 3 100%
Maintains inventory costing method 1 20% 2 66.67%

4.2.3 Descriptive Findings on Investing Activities

Investing activities consist of buying and selling long-term assets and other

investments. The following tables presented the investing activities performed by the

respondents which includes acquisition, lease and disposal of fixed assets.

Investing Activities Acquisition of Fixed Assets

Table 4.5 showed the investing activities of the respondents particularly in

acquisition of fixed assets for micro and small enterprises.

All of the micro enterprise respondents acquired fixed asset for cash while only

three of these respondents acquired fixed assets on account. All of the small enterprise

respondents acquired fixed assets for cash while two of the three respondents from small

enterprise acquired fixed assets on account. This shows that printing presses gives more

emphasis on acquiring of fixed assets for cash to get privileges from cash purchases like

trade discounts and cash discounts rather than acquiring it on account where you might

fail to pay within the credit period, you will pay more than what you should have to pay

because of interest incurred.

Under micro enterprises, three of the respondents acquired their fixed assets by

lump sum payments, and three respondents also for the acquisition of fixed assets by
56
instalment basis. While under small enterprises, one of the respondents acquired fixed

assets by lump sum payment while all of the respondents acquired fixed assets by

instalment basis. Respondents opted to acquire fixed assets by instalment basis because

they believed that instead of paying the full amount of the asset, in instalment, a part of

the money will be paid to the seller or creditor while the part that you should have paid for

the full amount will be used by the respondents for other purposes especially for the

business operations.

Four of the respondents from the micro enterprise and all of the respondents from

small enterprise did improvement and maintenance of their fixed asset. For the incidence

of maintenance, from micro enterprises, three of the respondents had done it when the

need arises while one had done it with intervals. While all of the respondents from small

enterprises had done maintenance when the need arises. In real practice, printing press

industries choose to have maintenance and repairs when it is really needed because it is

costly for their part when you do time to time repairs and maintenance.

All of the respondents, whether micro or small enterprise, provided an allowance

for depreciation of fixed assets, as well as recognition of carrying amounts and residual

value of the fixed assets. One reason why the printing press industries do depreciation is

for them to have proper matching of revenues and expenses for the current accounting

period and another reason is that the BIR recommended the printing press industries to

recognize depreciation to minimize their tax payable for the current period.

57
 Table 4.6
Investing Activities Acquisition of Fixed Assets
N=8
MICRO SMALL
N=5 N=3
FR % FR %
Acquisition of fixed assets for cash 5 100% 3 100%
Acquisition of fixed assets on account 3 60% 2 66.67%
Acquisition of fixed assets by lump sum payment 3 60% 1 33.33%
Acquisition of fixed assets by installment basis 3 60% 3 100%
Improvement and maintenance of fixed assets 4 80% 3 100%
Provides allowance for depreciation of fixed assets 5 100% 3 100%
Provides carrying and residual value of fixed assets 5 100% 3 100%

Investing Activities Lease of Fixed Assets

Table 4.7 presented the data pertaining to the lease of fixed assets on cash and

credit basis. By opting to lease fixed assets, entities performing this activity expend fewer

resources than directly acquiring the asset. Leasing and direct acquisitions both provide

the benefit of using the asset but differ in rights of ownership. For the respondents under

the micro entities, 40% lease fixed assets on cash. This could be attributed to their limited

capital wherein they do not have the resources to directly acquire these assets but require

the use of these assets for their operations. For the respondents under the small entities,

one out of the three respondents affirmed to this activity under both cash and credit bases.

Small-sized entities have higher capital for use and can afford the resource outlays for

direct acquisition of assets. Leasing remains an option for both micro and small-sized

entities for use in their operations.

58
 Table 4.7
Investing Activities Lease of Fixed Assets
N=8
MICRO SMALL
N=5 N=3
FR % FR %
Lease of fixed assets for cash 2 40% 1 33.33%
Lease of fixed assets on account 0 0 1 33.33%

Investing Activities Disposal of Fixed Assets

Table 4.8 presented the data on investing activities, specifically the disposal of

assets upon the cessation of their use in the business operations of the entity. Upon the

disposal of the asset, the carrying value of the asset is written off from the books of the

entity and a gain or loss is recognized upon the performance of this activity. For the

respondents of the micro-sized entities, they do not perform disposals on assets. An

inference can be made that these entities have not identified any reasons for disposing

their assets and that benefits are still received by these entities through the continued use

of these assets. For small-sized entities, one out of the three respondents performs this

activity on both cash and credit bases. On the data provided by the respondents, the

disposal of fixed assets is an activity that is not frequently performed since the entities

expect to receive benefits from the continued use of their assets and no factors have been

experienced by these entities that would require them to dispose of their assets.

59
 Table 4.8
Investing Activities Disposal of Fixed Assets
N=8
MICRO SMALL
N=5 N=3
FR % FR %
Disposal of fixed assets for cash 0 0 1 33%
Disposal of fixed assets on account 0 0 1 33%

4.2.4 Descriptive Findings on Financing Activities

Financing activities are transactions or business events that affect long-term

liabilities and equity. In other words, financing activities are transactions with creditors or

investors used to fund either company operations or expansions. The following tables

presented the financing activities performed by the respondent subdivided in investment

by the owner and obtaining of long-term loans.

Investment by the Owner

Table 4.9 below showed that for micro and small enterprises, all of the respondents

contribute capital through cash investment by the owner. This means that initial

investments to start-up businesses in this industry involve an investment of cash by the

proprietor. This cash investment can be used to acquire other assets for use.

Only two of the respondents under micro enterprises invests additional capital to

the business in a regular basis, while all of the respondents under small enterprises did

such. It is the objective that the owner should invest in a regular interval because cash on

hand of the business may not be sufficient to cover the necessary business expenditures.

60
 Furthermore, table 4.9 indicated that the proprietors of the respondents make

withdrawals from the business in the form of cash. This could mean that owners

experience tight personal cash position and opted to withdraw capital for their personal

use. Under micro entities, only two out of five respondents withdraws cash, and only one

out of three small entities opted for withdrawal.

Table 4.9
Financing Activities - Investment by the Owner
N=8
MICRO SMALL
N=5 N=3
FR % FR %
Cash investment of the owner 5 100% 3 100%
Additional capital is invested regularly 2 40% 3 100%
Cash withdrawal of the owner 2 40% 1 33%

Long-term Loans

Table 4.10 showed the external source of financing that an entity can choose to.

Under micro enterprises, two out of five respondents avail of long-term loans from banks,

the same as small enterprises, two out of three also made the same borrowings. Long-

term loans are used to finance intensive capital investment of the entity like purchasing

of fixed assets and spending large amount into operations. According to Tiffany Wright

(2015), long-term loans provide advantages to small business which includes: it

conserves operational cash flow, it provides leverage for owners equity and it builds

business credit.

Repayments of loans are done subsequent to loan acquisition. A fixed term is

usually provided in the contract made by the bank and the entity, including additional

61
terms such as interest rates, collaterals if any and etc. Payment of loans includes capital

and interest were done by two of the entities falling under micro and small entities.

According to two out of five micro entities, their borrowed funds are used mainly to

finance their business operations, while only one under small enterprise was doing such.

This implies that majority of the respondents borrow funds to finance expenditures other

than business operations.

Table 4.10
Financing Activities - Long-term Loans
N=8
MICRO SMALL
N=5 N=3
FR % FR %
Long-term loans/borrowings from bank 2 40% 2 66%
Payment of loans to bank 2 40% 2 66%
Payment of interest to bank on time 2 40% 2 66%
Borrowed funds are used to finance the business operations 2 40% 1 33%

62
 CHAPTER 5

SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

The thesis ends with chapter five where findings are respectively summarized and

presented, conclusions are drawn from data analysis and necessary recommendations

are formulated. The objectives of this chapter are (1) to summarize findings of printing

presses according to its business background and profile, and its financial management

activities and practices, (2) to provide conclusions for the research problem, (3) to indicate

how the research study can be implemented by micro and small printing press industry

players like proposing a financial management framework for the purpose to improve the

firm, and (4) to suggest further research in the future.

5.1 SUMMARY OF FINDINGS

The study was designed to examine the financial management processes of

selected micro and small entities of the printing press industry players in order to propose

a financial management framework for micro and small printing press which are operating

within the vicinity of Cebu City. The output of this study is to have a proposed financial

management framework, for entrepreneurs who are thinking to venture in such business

to which they can begin with. This summary addresses the specific objective of the study.

63
5.1.1 Micro Enterprises

Business Profile

Out of the eight respondents chosen for the study, five of these respondents are

micro-sized entities. These entities are all sole proprietorships. Total asset capitalization

for these entities range up to Php 3,000,000.00 consisting of both current and non-current

assets. As to employees working under these entities, the numbers range from 1 to 100

employees.

Operating Activities

All of the services are rendered for cash while only three of them also offers

services on credit. Majority of the micro enterprise respondents offer privileges on sales.

The collection of accounts roots from the three respondents who offers printing services

and for the only respondent who offers services other than printing. All of the respondents

purchase supplies and materials on cash but three of them also purchase on credit.

Purchase discounts are mostly availed by the respondents. Since three of the micro

enterprise respondents purchase on credit, it is also understandable that three of them

also pays the obligation on a timely basis. Utilities were also accounted by these entities.

Inventory were maintained and replenished by the micro enterprise respondents but only

one maintained an inventory costing method using periodic method.

Investing Activities

All of the respondents acquired their fixed asset on cash basis and at the same

time three of the respondents also acquired their fixed asset on account. Three of the

64
respondents acquired assets by both lump sum payment and instalment basis. Four of

the respondents did improvement and maintenance of their fixed assets. For the

incidence of maintenance, three of the four who did improvement and maintenance had

done it when the need arises while the remaining one respondent had done it with

intervals. All of the respondents provided an allowance for depreciation of fixed assets,

as well as recognition of its carrying amounts and residual values. Two of the respondents

leased fixed assets for cash. They did not perform disposal of assets.

Financing Activities

All of the respondents under micro enterprises finance the business through initial

capital investment. Few of them (two out five) provides additional capital on a regular

basis and also, few of them withdrew capital from the business through cash. Regarding

obtaining external financing through loans to finance the business operations, few of them

(two out of five) opted to long term borrowings from banks, and subsequently these loans

were repaid with interest to the bank on time.

5.1.2 Small Enterprises

Business Profile

Out of the eight respondents chosen for the study, three of these respondents are

small-entities. Two of these respondents are sole proprietorships with one organized as

a corporation. Total asset capitalization for these entities range from Php 3,000,001 to

15,000,000 consisting of both current and non-current assets. As to the employees

working under these entities, the numbers range from 1 to 100 employees.

65
Operating Activities

Small enterprise has three respondents and all of them rendered services on cash

but only two of them rendered services on account. All of them also offers privileges on

sales. Since there are three respondents who rendered services on account, collection of

accounts is thus performed afterwards. As for the purchase of supplies and materials, two

of them purchase on cash and credit while the other one purely purchase on credit. The

disbursements of these entities were accounted properly as they have paid the necessary

expenses enumerated in the table. Maintenance and replenishment of inventory and

supplies were also accounted properly but only two of them maintains an inventory

costing method using periodic method.

Investing Activities

All of the respondents acquired their fixed asset on cash basis and at the same

time two of the respondents also acquired their fixed asset on account. Only one of the

respondents acquired by lump sum payment and all of the respondents also acquired

their fixed asset on instalment basis. All of the respondents did improvement and

maintenance of their fixed assets. For the incidence of maintenance, all of the

respondents who did the maintenance had done it when the need arises. All of the

respondents provided and allowance for depreciation of fixed assets, as well as

recognition of its carrying amounts and residual values. One of the respondents leased

fixed assets both on cash and on account. One of the respondents disposed fixed assets

both on cash and on account

66
Financing Activities

Under small enterprises, all of the respondents begin the printing press venture

through initial cash investment made by the owner through cash and they invest additional

capital to the business regularly. Only one entity withdraws cash from the business. In

order to finance the operations, few of the respondents chose to borrow long term loan.

They paid the principal and interest on time.

67
 5.2 PROPOSED FINANCIAL MANAGEMENT FRAMEWORK FOR MICRO AND SMALL PRINTING PRESS

Table 5.1
Proposed Financial Management Framework

ACTIVITIES MICRO SMALL MEDIUM

1. OPERATING
a. Sales Cycle Accepts only cash sales. Accepts both cash and credit sales. Accepts both cash and credit sales.

Record each sales transaction in a Record sales in a database and an Record sales in a database, an
sales book/journal. entry should be made in a sales entry should be made in a sales
journal/book. journal/book, and a sales voucher
should be maintained to support
such sales.

Maintain a conservative credit Create a credit policy that strikes a Conduct a credit check on the
policy. balance between an aggressive customer and base from that
and conservative approach. information, supply a credit policy
that is suitable to that particular
client.

Offer privileges on sales. Offer privileges on sales. Offer privileges on sales.

Customer can choose to pay before Customer can choose to pay before Customer can choose to pay before
or after rendering the service. or after rendering the service. or after rendering the service.

No doubtful account is recognized Recognize doubtful accounts on Recognize doubtful accounts on

for receivables since all sales are receivables. receivable.
cash sales.

68
 ACTIVITIES MICRO SMALL MEDIUM
b. Purchases Cycle Provide credit policy to purchase Provide credit policy to purchase Provide credit policy to purchase
inventories with privilege. inventories with privilege. inventories with privilege.

Avail discounts within the time Avail discounts within the time Avail discounts within the time
period to minimize purchase cost period to minimize purchase cost period to minimize purchase cost

c. Disbursements Pay obligations on a cash basis to Incur obligations on a credit basis Incur obligations on a credit basis
Cycle avoid accumulation of liabilities and so that funds may be available to so that funds may be available to
penalties upon delayed payment operations operations

Pay credit purchases on time so Pay credit purchases on time so Pay credit purchases on time so
that privileges can be availed that privileges can be availed that privileges can be availed

Discounts could be paid within Discounts could be paid within Discounts could be paid within
interval times, e.g. 2/10, 2/15, n/30, interval times, e.g. 2/10, 2/15, n/30, interval times, e.g. 2/10, 2/15, n/30,
so it is advisable pay in the period so it is advisable pay in the period so it is advisable pay in the period
with the highest benefit. with the highest benefit. with the highest benefit.

Pay utilities expense in cash. Pay utilities expense either in cash/ Pay utilities expense either in cash/
credit. credit.

d. Inventory Implement a proper inventory Implement a proper inventory Implement a proper inventory
Management system preferably periodic system system preferably periodic system system preferably periodic system
due to high volume inventory due to high volume inventory due to high volume inventory
having small peso investment having small peso investment having small peso investment

69
 ACTIVITIES MICRO SMALL MEDIUM
Implement a proper inventory Implement proper inventory costing Implement proper inventory costing
costing (FIFO, Weighted Average (FIFO, Weighted Average and (FIFO, Weighted Average and
and Moving Average) Moving Average) Moving Average)

Implementation of proper inventory Implementation of a proper Implementation of a proper

storage as may fit best. inventory storage as may fit best. inventory storage and should avoid
buying goods when the need arises
to prevent delays in operation.

2. INVESTING
a. Acquisition of Acquiring fixed assets on cash to Acquiring fixed assets on cash to Acquiring fixed assets on cash to
Fixed Assets avail the privileges on cash avail the privileges on cash avail the privileges on cash
purchases purchases purchases and purchases on
account

Acquire fixed assets on instalment
basis to lessen the burden of cash
outlay and these funds could be
used to finance other operation.
Acquire fixed assets on lump sum Acquire fixed assets on lump sum
and/or instalment payment payment because the entity has
whichever is more advantageous capacity to pay and to avoid
payment of interest if it should have
been in instalment

Proper schedule of repairs and Proper schedule of repairs and Proper schedule of repairs and
maintenance maintenance maintenance

70
 ACTIVITIES MICRO SMALL MEDIUM
b. Lease of Fixed Leasing of fixed assets is a more Leasing of fixed assets is a viable Entities under this classification can
Assets viable alternative to possess assets alternative for entities under this lease fixed assets as well but
for use in business operations if the classification if direct acquisition of considering the volume of
cost of purchasing the asset is too the asset requires capital operations, direct acquisition of the
high for entities under this expenditures that are considerably asset affords the entity full control of
classification. extensive for the entity. the asset.

c. Disposal of Fixed If the entity no longer expects to
Assets realize benefits from continued use
of the asset, they may choose to
dispose of the asset with the proper
accounting treatment including
recognizing a gain or loss from the
disposal.
Disposals of fixed assets are to be
recorded with the recognition of
gains or losses from the disposal of
the asset if the entity sees no
benefit from the continued use of
the asset.
Disposals made on fixed assets are
to be made if the entity no longer
makes use of the asset or expects
any benefit from it. Gains and
losses are to be recorded as well.

3. FINANCING
a. Investment by Cash investment by the owner is Owners investment is still Owners investment is still
the Owner appropriate for micro enterprises advisable, but small entities can advisable, but small entities can
requires only lesser capital. avail financing from other sources avail financing from other sources
due to small entities requires more due to medium entities requires
capital than micro entities. more capital than micro and small
entities.

Contribute non-cash investment. Contribute non-cash investment to Contribute non-cash investment to

be used for wide business be used for wide business
operation. operation.

71
 ACTIVITIES MICRO SMALL MEDIUM
Invest capital to the business Invest capital to the business Invest capital to the business
regularly. regularly. regularly.

Withdraw capital when it is Withdraw capital when it is Withdraw capital when it is

necessary or the business has a necessary or the business has a necessary or the business has a
sufficient fund for the operation. sufficient fund for the operation. sufficient fund for the operation.

b. Long-term Loans Advisable to avail loans from banks
to expand pool of funds but should
establish credit standings, capable
of compliance with requirements to
obtain these loans.
Avail loans from banks to expand Avail loans from banks to expand
pool of funds when internally pool of funds when theres
generated resources are extensive capital expenditure like
insufficient or when interest rates business expansion
are low.

Minimize the availment of loans
from lending institutions other than
banks due to imposition of high
interest rates and limited amount of
proceeds from these loans.
Minimize the availment of loans
from lending institutions other than
banks due to imposition of high
interest rates and limited amount of
proceeds from these loans.
Minimize the availment of loans
from lending institutions other than
banks due to imposition of high
interest rates and limited amount of
proceeds from these loans.

Pay interest on time or according to Pay interest on time or according to Pay interest on time or according to
the terms agreed upon. the terms agreed upon. the terms agreed upon.

Repayment of loan capital upon the Repayment of loan capital upon the Repayment of loan capital upon the
arrival of the time fixed. arrival of the time fixed. arrival of the time fixed.

72
5.3 CONCLUSION

This section summarizes conclusions related to the research questions and

findings analyzed and presented in the prior chapter. Conclusions of business profile,

financial management practices and financial management activities.

Based on the data gathered from the respondents, the findings and interpretation,

the researchers conclude that micro and small printing press industry players in Cebu

City do not implement a formal financial management framework. The researchers attest

to the said conclusion considering the following factors such as business organization,

entity categorization, capitalization, and business activities. In addition, the respondents

were not well knowledgeable of the theoretical and comprehensive frameworks which will

assist them and improve their financial management activities. Also the respondents, at

this point in their business life, were satisfied of their currently implemented informal and

self-formulated financial management framework.

5.4 RECOMMENDATIONS

Through the course of the study and in consideration of the findings and

conclusions presented, the researchers provide the following recommendations:

For the micro and small printing press industry players, recommendations are

provided in the previous section of this chapter, Propose Financial Management

Framework.

For future researchers, we advise that they should provide more time in gathering

their required data. They should send letters immediately to the respondents to have their

consent and proceed with data analysis after the required data are gathered. The data

73
gathering is a critical point of the study and it takes time especially when respondents are

busy. They should also provide wide range of respondents other than in Cebu City to

increase the scope of their study, to reduce risk of sampling and to faithfully represent the

industry.

For future users, we recommend to use our findings base on their own judgement

and apply it for the benefit of the Philippine economy especially for MSMEs engaged in

printing services.

74
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 APPENDICES

APPENDIX A

Transmittal Letter

January 27, 2016

University of San Carlos
P. del Rosario Street
Cebu City 6000
Cebu, Philippines

_________________________
_________________________
_________________________
_________________________

Dear Sir/Maam:

We, fourth year students of Bachelor of Science in Management Accounting,

currently enrolled in the subject AC527: Accounting Synthesis will conduct a study with
the proposed title Financial Management Practices of Selected Micro and Small Printing
Press Industry Players in Cebu City. In this regard, we would want to include the
__________ as one of our respondents for our research. By that, we would appreciate
the opportunity of spending 30-60 minutes with you for an interview which will guide the
research in addressing the research problem.

It is our expectations that the findings of this research will support the efforts of
your organization in identifying company specific measure that is relative to delivering
quality care service.

Rest assured that all data gathered will be treated with utmost confidentiality and
for academic purposes only.

We look forward for your favorable response to our request.

81
Respectfully yours,

Bonghanoy, Kim Daniel E.

Consad, Jonas S.
Diaz, Jayvee Kim B.
Edillo, Kimkim M.
Gomez, Daryl A.
Pepito, Ranedell T.
Researchers

Noted by:

Mrs.Eleanor D. Paclijan, CPA, MAIA

Faculty Adviser

82
 APPENDIX B-1

Dear Sir/Maam:

We, fourth year students of Bachelor of Science in Management Accounting,

currently enrolled in the subject AC527: Accounting Synthesis will conduct a study with
the proposed title Financial Management Practices of Selected Micro and Small Printing
Press Industry Players in Cebu City. In this regard, we would appreciate the opportunity
of spending 20-40 minutes with you for an interview which will guide the research in
addressing the research problem.

Rest assured that all data gathered will be treated with utmost confidentiality and
for academic purposes only.

We look forward for your favorable response to our request.

Respectfully yours,

Ranedell T. Pepito
Group Leader

Noted by:

Mrs.Eleanor D. Paclijan, CPA, MAIA

Faculty Adviser

83
 APPENDIX B-2

QUESTIONNAIRE RESPONDENT:
POSITION:

1. BUSINESS BACKGROUND
Fill out the table completely.

BUSINESS NAME:
LOCATION:
YEAR ESTABLISHED:

2. BUSINESS PROFILE
Check only one (1) choice for this section.

2.1 Business Organization 2.3 Capitalization

Sole Proprietorship Up to P3,000,000
Partnership P3,000,001 - P15,000,000
Corporation P15,000,001 - P100,000,000
Cooperative More than P100,000,000
Subsidiary Other range ________________

2.2 Category 2.4 Number of Employees

Small Enterprise 1 9 employees
Micro Enterprise 10 99 employees
100 199 employees
More than 200 employees

3. BUSINESS ACTIVITIES
Please check if you perform the following activities:
The first checkbox () indicates the performance/nonperformance of an activity. You may check
all that may apply.

3.1 Operating Activities Cash Credit

Sales of printing services
Sales other than printing services (e.g. printing materials)
Offers privileges on sales
Maintains credit term policy for sales on credit
Checks customers credit standing
Provides allowance for sales return

84
 Collects accounts receivable
Provides allowance for doubtful accounts
Purchases of supplies and materials
Enjoys privileges on purchases
Maintains credit term policy for purchases on credit
Payment of liabilities to creditors and suppliers
Incurs utilities
Pays utilities
Maintains inventory of supplies and materials
Replenishes inventory of supplies and materials
Maintains inventory costing method

3.2 Investing Activities Cash Credit

Acquisition of printing equipment
Acquisition of equipment other than printing equipment
Lease/ rent of printing equipment
Lease/ rent of equipment other than printing equipment
Improvement and maintenance of equipment
Acquisition of furniture and fixtures
Lease/ rent of furniture and fixtures
Improvement and maintenance of furniture and fixtures
Acquisition of vehicles
Lease/ rent of vehicles
Improvement and maintenance of vehicles
Acquisition of building
Lease/ rent of building
Acquisition of land
Lease/ rent of land
Provides allowance for depreciation of non-cash assets
Provides carrying and residual value of non-cash assets
Disposal of fixed assets
Gain/ loss on disposal of fixed assets
Business Expansion

3.3 Financing Activities

Cash investment of the owner
Investment of the owner ________________ (other than cash)
Cash withdrawal of the owner

85
 Withdrawal of the owner ________________ (other than cash)
Short-term loans/ borrowings
Long-term loans/borrowings
Loan financing from bank
Loan financing from other lending institutions
Investment from ____________ (others)
Payment of loans from bank
Payment of loans from other lending institutions

4. BUSINESS OPERATIONS
Check all that may apply.

4.1 Types of Commercial Printing Others (specify):

Traditional printing ____________
Digital printing
4.4 Printing materials offered (if any)
4.2 Selling Strategy Bond paper
By the entity itself News print
Through sales agent Photo/glossy paper
Putting up of branch/es Ink
Grant of franchise Others (specify): ____________
Business subsidiary
Others (specify): 4.5 Types of Customers
____________ Walk-in/ One-time customers
Long-term customers
4.3 Services Offered Others (specify): ____________
Tarpaulin printing
Mimeographing 4.6 Placement of Orders
Bookbindery Telephone/ phone calls
Labels Internet/ email
Silkscreen Personal
Flyers Others (specify): ____________
Mugs and tumblers
Shirt printing 4.7 Privileges on SALES (if any)
Yearbooks Trade discount
Souvenir Programs Cash discount on cash sales
Calendars Sales discount on credit sales
Calling Cards Premiums
Piso Print Points

86
 Freebies and gifts
Others (specify): ____________

4.8 Credit Terms for CREDIT SALES

2/10, n/30
2/15, n/30
Others (specify): ____________

4.9 Collection of Accounts Always Often Rarely Never

Within the discount period
Beyond DP but within the credit period
Beyond the CP but within 6 months
6-12 months
Beyond 1 year

4.10 Procurement of Supplies 4.11 Privileges on PURCHASES (if any)

From one (1) supplier Trade discount
From more than one supplier Cash discount on cash purchases
On consignment basis Sales discount on credit purchases
Premiums
4.12 Credit Terms for CREDIT PURCHASES Points
2/10, n/30 Freebies and gifts
2/15, n/30 Others (specify): ____________
Others (specify):
____________

4.13 Payment of liabilities Always Often Rarely Never

Within the discount period
Beyond DP but within the credit period
Beyond the CP but within 6 months
6-12 months
Beyond 1 year

4.14 Materials and Supplies Card/board paper

Bond paper Photo/glossy paper
Newsprint Ink
Construction paper Paste/ glue

87
 Others (specify): Weighted Average
____________ Others (specify): __________

4.15 Inventory system 4.17 Inventory Replenishment

Perpetual system At a certain level determined
Periodic system management
When the need arises
4.16 Inventory costing method No apparent pattern
FIFO (First-in, First-out) On a timely basis (e.g. daily,
LIFO (Last-in, First-out) weekly etc.) ___________

4.18 Utilities incurred Cash Deferred Payment

Salaries/ wages
Telephone/ internet
Water
Electricity
Rent/ lease
Interest
Insurance
Taxes
Other Licenses
Selling expenses
General and admin expenses
Others (specify): ____________

4.19 Ownership of Fixed Assets Purchased/ Leased/

owned Rent
Printing equipment
Other than printing equipment ___________
Tools, patterns and dies
Furniture and Fixtures
Vehicles
Building
Land

88
4.20 Machinery and Equipment
Riso machine
Mimeograph machine
Tarpaulin machine
Offset machine
Desktop machine
Letterpress machine
Paper cutting machine
Silkscreen machine
Digital printing press
Bindery
Computers units
Scanners
Desktop printers
Others (specify): ____________
4.21 Furniture and Fixtures
Tables and chairs
Frames and cabinets
Air-conditioners
Lights and wirings
Others (specify): ____________
4.22 Vehicles
Delivery Van
Motorcycles
Others (specify): ____________

4.23 Maintenance and Replacement Major Minor

Printing equipment
Other than printing equipment ___________
Tools, patterns and dies
Furniture and Fixtures
Vehicles
Building
Land

4.24 Incidence of Maintenance and Replacement

When the need arises
Intervals (quarterly, semiannually) __________
Others (specify): ____________
Never

4.25 Kinds of Employees Hired

Full-time employee
Part-time employee
Shiftees (Night/Day) _________
Others (specify): ____________

4.26 Wage rate

Hourly
Daily

89
 Fixed
Others (specify): ____________

4.27 Incidence of wage payment

Everyday
Weekly
Bimonthly
Monthly
Others (specify): ____________

4.28 Method of Bookkeeping 4.30 BIR Accredited

Single entry Yes
Double entry No

4.29 Basis of Accounting 4.31 SEC Registered

Accrual Basis Yes
Cash Basis No

5. OTHER FINANCIAL MANAGEMENT PRACTICES

Check the corresponding YES or NO column.

FINANCIAL MANAGEMENT PRACTICES YES NO

1. Customers are given the option to pay right away or after the services have been rendered.
2. We extend payment period for those customers that couldnt pay on time.
3. We pay our credit purchases on time.
4. The printing business maintains a certain threshold for its monthly income.
5. We purchase fixed assets by lump sum payment.
6. We purchase fixed assets by installment basis.
7. Additional capital is invested into the business regularly.
8. The entity borrows funds from banking and other financial institutions.
9. The entitys debt obligations are paid with interest on time.
10. The borrowed funds are mainly used to finance business operations.
11. All earnings for the day are remitted to the owner/manager at the end of the day.

90
 APPENDIX B-3

Dear Sir/Maam:

We, fourth year students of Bachelor of Science in Management Accounting,

currently enrolled in the subject AC527: Accounting Synthesis will conduct a study with
the proposed title Financial Management Practices of Selected Micro and Small Printing
Press Industry Players in Cebu City. In this regard, we would appreciate the opportunity
of spending 20-40 minutes with you for a survey which will guide the research in
addressing the research problem.

Rest assured that all data gathered will be treated with utmost confidentiality and
for academic purposes only.

We look forward for your favorable response to our request.

Respectfully yours,

Ranedell T. Pepito
Group Leader

Noted by:

Mrs.Eleanor D. Paclijan, CPA, MAIA

Faculty Adviser

91
 Timetable of Activities

Nov Dec Jan Feb Mar

Activities / Time W W W W W W W W W W W W W W W W W W

3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

1 Select topic as a class

2 Analyze the problem
3 Select industry
4 Develop the introduction
5 Review related literature and studies
6 Formulate research methodologies
7 Complete research proposal
8 PROPOSAL HEARING
9 Proposal approved
10 Collect primary and secondary data
11 Analyze and interpret data
12 Complete conclusions and recommendations
13 Finish draft of research paper
14 Submit revised draft
15 ORAL DEFENSE
16 Final Research Paper approved

92
 APPENDIX D

Program Budget

Preparation for the study

1. Selecting a topic 0.00
2. Analyzing the problem 0.00
3. Review of Related Literature 0.00
00.0
Research Proposal Preparation
4. Initial submission of chapters 1-3 67.00
5. Revision of the previously submitted work 71.00
6. Printing and binding for panelists copy 503.00
7. Advisers copy after proposal hearing (unrevised) 122.00
8. Advisers copy after proposal hearing (revised) 148.00
887.00
Field Work
9. Printing of letter and interview guide 34.00
10. Token given to the hospital respondents 367.00
11. Bond payment for security 2000.00
2401.00
Final Paper
12. Printing of Final Paper (unrevised) 155.00
13. Printing & Binding of Final Paper (unrevised) 615.00
770.00

TOTAL 4,058.00

93
 APPENDIX E
CURRICULUM VITAE

PERSONAL BACKGROUND

Name: Kim Daniel E. Bonghanoy

Address: Espina Compound, Linao, Talisay City, Cebu

Contact Number/s: 505 9610 / 0922 955 1747

E-mail Address: kidanbo@gmail.com

EDUCATION
April 2017 UNIVERSITY OF SAN CARLOS P. del Rosario Street, Cebu City
(Tertiary) Bachelor of Science in Management Accounting

March 2012 CEBU CITY NATIONAL SCIENCE HIGH SCHOOL Salvador St., Labangon, Cebu City
(Secondary) Graduate (Highschool)

PROFILE
Excellent intrapersonal skills and can work with others or as a team
Can learn fast in a short span of time
Demonstrates excellent work ethics
Excellent communication skills both oral or written (Cebuano, Filipino, English)
Multi-tasking skills and able to expedite work efficiently and effectively
Can execute computer software and applications precisely
Has initiative, responsible and has a strong passion for leadership

ORGANIZATIONAL AFFILIATIONS

2015 Present JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS USC CHAPTER

EXECUTIVE AUDITOR

2013 2014 JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS USC CHAPTER

Division Two Public Relations Officer

94
 CURRICULUM VITAE

PERSONAL BACKGROUND

Name: Jonas S. Consad

Address: Sanchez Bldg. Sanciangko Street, Cebu City

Contact Number/s: 0906-347-3501

E-mail Address: jonasconsad123@gmail.com

EDUCATION
April 2017 UNIVERSITY OF SAN CARLOS P. del Rosario Street, Cebu City
(Tertiary) Bachelor of Science in Management Accounting

March 2012 SOGOD NATIONAL HIGH SCHOOL Sogod, Southern Leyte

(Secondary) Graduate (Highschool)

PROFILE
Can learn fast in a short span of time
Can execute computer software and applications precisely
Multi-tasking skills and able to expedite work efficiently and effectively
Demonstrates excellent work ethics
Has initiative, responsible and has a strong passion for leadership
Excellent communication skills both oral or written (Cebuano, Filipino, English)
Excellent intrapersonal skills and can work with others or as a team

ORGANIZATIONAL AFFILIATIONS

2012 Present JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS USC CHAPTER Member

2014 Present JUNIOR FINANCIAL EXECUTIVES Member

95
 CURRICULUM VITAE

PERSONAL BACKGROUND:

Name: Jayvee Kim B. Diaz

Address: #145 3rd Street, Espina Village, B. Rodriguez Street, Cebu City 6000

Contact Number/s: 09436455772/09352381006

Email Address: jkdiaz123@gmail.com

EDUCATIONAL BACKGROUND:

TERTIARY EDUCATION: University of San Carlos

P del Rosario Street

Cebu City 6000

SECONDARY EDUCATION: Baybay National High School

30 de Deciembre Street

Baybay City, Leyte 6521

PROFILE:

Hardworking, responsible, and passionate at work

Demonstrates excellent work ethics
Can work efficiently and effectively
Excellent intrapersonal skills and can work with others as team
Can execute computer software like MS Word, Excel, PowerPoint, etc.
Good communication skills both oral and written (Cebuano, English, Filipino)
Able to learn fast in short span of time

ORGANIZATIONAL AFFILIATIONS:

2012 Present Junior Philippine Institute of Accountants Cebu Chapter (Member)

2014 Present Junior Financial Executives (Member)

96
 CURRICULUM VITAE

PERSONAL BACKGROUND

Name: Kimkim M. Edillo

Address: Sitio Mayupay Quiot, Cebu City

Contact Number/s: 0932 309 5818

E-mail Address: kimkimedillo@gmail.com

EDUCATION
April 2017 UNIVERSITY OF SAN CARLOS P. del Rosario Street, Cebu City
(Tertiary) Bachelor of Science in Management Accounting

March 2012 UNIVERSITY OF THE VISAYAS Colon St., Cebu City

(Secondary) Graduate (Highschool)

PROFILE
Demonstrates excellent work ethics
Excellent communication skills both oral or written (Cebuano, Filipino, English)
Multi-tasking skills and able to expedite work efficiently and effectively
Can execute computer software and applications precisely
Has initiative, responsible and has a strong passion for leadership
Can learn fast in a short span of time
Excellent intrapersonal skills and can work with others or as a team

ORGANIZATIONAL AFFILIATIONS

2012 Present JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS USC CHAPTER

MEMBER

97
 CURRICULUM VITAE

PERSONAL BACKGROUND

Name: Daryl A. Gomez

Address: Boalan, Zamboanga City

Contact Number/s: 0916-4212-036

E-mail Address: lyrad.gomez@gmail.com

EDUCATION
April 2016 UNIVERSITY OF SAN CARLOS P. del Rosario Street, Cebu City
(Tertiary) Bachelor of Science in Management Accounting

March 2010 ATENEO DE ZAMBOANGA UNIVERSITY Lunzuran, Zamboanga City

(Secondary) Graduate (Highschool)

PROFILE
Demonstrates excellent work ethics
Excellent intrapersonal skills and can work with others or as a team
Can execute computer softwares and applications precisely
Excellent communication skills both oral or written (Cebuano, Filipino, English,
Chavacano)
Can learn fast in a short span of time
Can quickly adjust

ORGANIZATIONAL AFFILIATIONS

2010-2011 Self Actualization and Leader Training (S.A.L.T.) Member

2011 Present JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS USC CHAPTER Member

98
 CURRICULUM VITAE
PERSONAL BACKGROUND

Name: Ranedell T. Pepito

Address: P. Remedio Street, Banilad, Cebu City

Contact Number/s: 0921-687-5445 // 505-7764

E-mail Address: ranedellpepito@gmail.com

EDUCATION
April 2017 UNIVERSITY OF SAN CARLOS P. del Rosario Street, Cebu City
(Tertiary) Bachelor of Science in Management Accounting

March 2012 SANTOS E. CONAG NATIONAL HIGH SCHOOL Poblacion, Esperanza, Masbate
(Secondary) Graduate (Highschool)

PROFILE
Has initiative, responsible and has a strong passion for leadership
Demonstrates excellent work ethics
Multi-tasking skills and able to expedite work efficiently and effectively
Excellent intrapersonal skills and can work with others or as a team
Can execute computer softwares and applications precisely
Excellent communication skills both oral or written (Cebuano, Filipino, English)
Can learn fast in a short span of time

ORGANIZATIONAL AFFILIATIONS

2012 Present JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS USC CHAPTER Member

2014 Present JUNIOR FINANCIAL EXECUTIVES Member

2015 Present PHILIPPINE JUNIOR JAYCEES INC., USC CHAPTER Member

99