THE INFLUENCE OF WORKING CAPITAL MANAGEMENT PRACTICES IN THE

GROWTH OF MERCHANDISING SMALL AND MEDIUM ENTERPRISES IN

TUGUEGARAO CITY

A Research presented
to the faculty of the School of Accountancy, Business and Hospitality
University of Saint Louis Tuguegarao

In Partial Fulfillment
of the requirements for the Degree
BACHELOR OF SCIENCE IN ACCOUNTANCY

TAGAL, MAE FLOR B.

TAMARAY, LHENNEDY S.
VALDEZ, ANNALEE JANE E.
ZINAMPAN, JAYPEE S.

November 2018

ABSTRACT

Small and Medium Size Enterprises (SMEs) are seen as a driving force for the
promotion of an economy and a well designed and implemented working capital
management practices is expected to contribute positively to the creation of a firm’s
value. This study aimed to determine the influence of working capital management
practices to the growth of merchandising small and medium enterprises in Tuguegarao
City and it was hypothesized that working capital management practices (Cash
Management Practices, Accounts Receivable Management, Accounts Payable
Management Practices, Inventory Management Pratices) influences the growth of SMEs
as to Return on Assets.Qualitative research method was utilized. A three-part
questionnaire was used to gather data. The study used frequency and percentage as a
statistical technique.Pearson Correlation was adopted for the analysis of data. 36
merchandising small and medium enterprises within Tuguegarao City was the
respondents of the study. Majority of them are sole proprietorship in nature with up to
five employees and have been operating for 3 to 5 years.The findings in respect of the
main purpose of the study indicated that there is no significant relationship between the
WCM practices of SMEs and the SMEs growth as to return on assets.

Key words: SMEs, Working Capital Management Practices, Growth

INTRODUCTION

In the developing economy, the growth of business is unpredictable regardless of

the profit earned unless current obligations are considered. Working capital
management plays the most fundamental decision in business of different sizes in order
to attain the balance between the risk and return. Working capital determines if a
business has liquid assets. It can be defined as the difference between current assets
and current liabilities. The main components of working capital are cash, accounts
receivable, inventory and accounts payable.

Working capital management (WCM) plays a significant role in the successful

operation of business due to its significant effect on corporate profitability and liquidity
(Alhassan, Fuseini and Yakubu, 2017). Christopher and Kamalavalli (2009) highlighted
that sound working capital management policies improve firms' profitability and market
value, and the negligence of working capital management may lead to operational
challenges. Working capital management must consider profitability and efficiency.
Padachi (2006) emphasized that a company has efficient working capital when their
current assets are higher than its current liabilities.

Small and Medium enterprises is defined as provided under the Republic No.
9501: The Magna Carta for Micro, Small and Medium Enterprises as any business
activity or enterprise engaged in industry, agribusiness and/or services single
proprietorship, cooperative, partnership, or corporation which are identified in 2 major
ways: assets or employment size, the total assets inclusive of those arising from loans
but exclusive of the land of which the particular business entity’s office, plant and
equipment are situated, must have value falling under the following categories: Asset
Size: Small – 3,000,001 up to 15,000,000; Medium – 15,000,001 up to 100,000,000
(Micro - less than 3,000,001; Large – above 100,000,000) Employment Size – Small –
10-99 workers; Medium – 100-199 workers (Micro – less than 10 regular employees)
Small and Medium Enterprises constitute a direct effect towards the growth and
development of every economy. Small and Medium Enterprises (SMEs) play a pivotal
role in any economy through contributory to employment generation and GDP growth
(Sunday, 2011). Large numbers of business failures, especially SMEs have been
attributed to the inability of financial managers to plan and control properly the current
The Influence of Working Capital Management Practices in the Growth of
Merchandising Small and Medium Enterprises in Tuguegarao City | 2
assets and current liabilities of their firms. Notwithstanding the remarkable achievement
of a number of SMEs, many more still struggle to ensure long term growth, profitability
and survival (Lyngstadaas and Berg, 2016).

According to Ramia, Zhao and Moosa (2014), poor working capital management
and inadequate long-term financing are the main course of failure among Small
business. Afeef, (2011) explicated that findings from their analyses suggested that
indicators of working capital management had a perceptible impact on profitability of
firms under study. However, according to Dedunu (2011), their study shows a negative
relationship between working capital management and SMEs profitability. The results of
the formerly mentioned researches appear to be opposing that proper working capital
management to be applied for business growth in Tuguegarao City could not be easily
identified. Therefore, the researchers would like to specifically determine how working
capital management influences the growth of Small and Medium Enterprises in
Tuguegarao City.

Research Objectives and Questions

This study aimed to determine the influence of working capital management

practices to the growth of Merchandising Small and Medium Enterprises in Tuguegarao
City. Specifically, it aims to answer the following questions:
1. What are the business’ characteristics as regards to:
a. Length of the business’ operation
b. Legal ownership
c. Number of employees
2. What are the Working Capital Management (WCM) practices of the Small- and
Medium Enterprises as to:
a. Cash Management
b. Receivable Management
c. Accounts Payable Management
d. Inventory Management
3. What is the Return on Assets of the business?
4. Is there a significant relationship between the WCM practices of SMEs and the SMEs’
growth as to Return of Asset?
5. Is there a significant difference on the Return on Assets when grouped according to
business characteristics?

Hypotheses

1. There is no significant relationship between the WCM practices of SMEs and the
SMEs growth as to Return on Asset.
2. There is no significant difference on the Return on Assets when grouped
according to business characteristics.

Significance of the Study

The result of this study is of big help to the decision-makers of SMEs who will be
made aware of the effective working-capital management practices that are available to

The Influence of Working Capital Management Practices in the Growth of

Merchandising Small and Medium Enterprises in Tuguegarao City | 3
help them manage their businesses better. They will become more aware of the current
financial practice that hinders the profitability and their business growth. For the
government, this study is important by contributing additional income to the Gross
Domestic Product (GDP) of the country considering the growth of SMEs. For the
researchers, the study will help them discover approaches relevant in managing a
business’ working capital that other researchers are unable to explore.

Literature Review

Underpinning Theory

There are multiple frameworks which apply directly to studying the influence of
working capital management practices on the growth of Small- and Medium Enterprises
(SMEs). These theories provide a basis for understanding how working capital
management practices influence the level of growth of businesses.

The theory to be adopted is the resource- dependency theory propounded by

Barley (1991) which implies that firms could underperform due to inadequate resources
and could therefore be extended to SMEs financial performance. Knowledge is
considered as a strategic resource and those SMEs managed by owners with little
knowledge in business management could suffer from this predicament. Other scholars
like Abuzayed (2012) findings from study on working capital management in Ghana,
argue that cash management of SMEs depends on the mind set and experience of the
owners, Ssekajugo et. al. (2013)

Discussion of Literature by Themes

Cash Management Practices

Working capital is considered a lifegiving force for any economic unit and the most
important function of corporate management. If WCM is not given due consideration,
firms are likely to fail and face bankruptcy (Abimbola and Kolawole 2017). One of the
components of the working capital is cash, thus managing cash in very crucial because it
is the lifeblood of an organization, it is needed in running the business, from the
acquisition of asset held as inventory up to its collection from the sale transactions.

According to Agyei-Mensah (2012),poor management of working capital means that

funds are unnecessarily tied up in idle assets hence reducing liquidity and also reducing
the ability to invest in productive assets such as plant and machinery, so affecting
profitability, which corroborate to the study of Abioro (2013) which revealed that the
company’s decision on what amount to hold as cash balance, the choice of the source
of short term finances, the approach adopted for the management of its collections and
disbursements, its cash forecasting strategy and investment attitude towards idle fund
form the major basics for ensuring an efficient and effective cash management system.

The result of the study of Cetenak (2012) demonstrate that firms can increase
profitability measured by gross operating profit by shortening collection period of
accounts receivable and cash conversion cycle. Leverage as a control variable has a
significant negative relationship with firm value and profitability of firms. This means,
increase in the level of leverage will lead to decline in the profitability of the firm and the

The Influence of Working Capital Management Practices in the Growth of

Merchandising Small and Medium Enterprises in Tuguegarao City | 4
value of the firm. Also, the study of Jagongo (2013) found the same result wherein the
cash conversion cycle, number of day’s account receivable had negative relationship
with profitability.

Accounts Receivable Management Practices

A non-listed Ghanaian firm gross profit on assets is reduced by lengthening the
number of day’s accounts receivable, number of days of inventory and number of days
accounts payable. Thus, the findings suggest that managers can create value for their
shareholders by reducing the number of days for accounts receivables. In addition, the
negative relationship between accounts receivables and firm’s profitability suggest that
less profitable firms will pursue a decrease of their accounts receivables in an attempt to
reduce their cash gap in the cash conversion cycle. (Addae, A., Baasi, M. (2013))

According to Alipour (2011), there is a significant relation between working capital

management and profitability and working capital management has a great effect on the
profitability of the companies and the managers can create value for shareholders by
means of decreasing receivable accounts and inventory and the managers must look for
the methods that by means of them and correct management be effective on the
profitability of the companies.

Anyago, J., Ojera , P., Onditi, A., Wu’Adongo, O. (2015) studied the relationship
between working capital management and profitability of Small size enterprises in
Kisumu County, Kenya and the findings of the study indicate a significant relationship
between profitability and accounts receivables of Small sized enterprises. They
recommended that managers should reduce inventory periods. The findings did not
conform to the findings of (Deloof 2003; Lazardis et al 2006; Padachi 2006), however the
findings of (Sharma &Kumar 2011; Nyabwanga et al 2012) showed a positive
relationship which conforms to the findings of this study. The rationale of the deviating in
number of days accounts receivable and profitability is caused by a longer span taken by
the firm to receive payments from customers. Their study revealed that 26.4% (83) of the
SSE businesses never reviewed their levels of receivables. The Pearson moment
correlation conducted indicated that there was a significant relationship between
business profitability and account receivable management in Small sized enterprises,
which was fairly a strong, significant positive correlation between the two variables.

The results of the study of Donkor (2015) indicate that SMEs lack resources to
manage their receivables, no proper debt collection and no credit officers were
employed. Majority of the producers sell on credit and also buy most of their input for
sachet water production on credit. Some of the producers do not have credit control and
debt collection policies. There is therefore clear indication that the SMEs in Ghana have
weak trade receivables management practices. They concluded that SMEs in Ghana do
not manage their working capital properly which may influence the growth and survival of
many of the SMEs. Therefore, in order to improve on the working capital management
practices of SMEs in Ghana, they recommended the following: Owners/Managers of
SMEs should establish a credit control department with a fulltime credit officer and follow
credit control policy procedures; owners/managers are to employ more qualify
accounting staff to manage their accounting functions for them; Owners/managers of
SMEs must adopt a more economic theory of inventory management like the economic
order model to determine the level of inventory to maintain. The effect of accounts

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Merchandising Small and Medium Enterprises in Tuguegarao City | 5
receivable and financial performance of manufacturing firms in Kenya was analyzed by
Wanyoike (2017). The results showed that there is a positive relationship.

Inventory Management Practices

The composition of an inventory differs depending on what kind of production or
business companies are involved in. The five different assets an inventory can consist of
are; raw materials, work in progress materials, finished goods, extra material and
consumption materials mentioned by Donkor, J. (2015). With high levels of inventory
management will result into high levels of profitability of the Small sized enterprises.
Anyago, et al. (2015) analyzed that the management of inventory influences positively
the profit generations and as a consequence of the return on assets (ROA).

Efficient inventory management practices had the greatest influence on financial

performance as indicated by its largest mean and standard statistics. Charlesb, et al.
(2016) suggested that SMEs should pay more attention to the management of inventory
since it has a larger influence on financial performance of SMEs. SMEs always review
inventory levels and prepare inventory budgets, but the ability of applying theories of
inventory management in inventory budget is very limited discovered by Mensah, B.
(2012). Most of them did not know anything about economic order quantity (EOQ) added
by Donkor, J. (2015). Only 40% of the firms have knowledge about (EOQ) but are not
using it for their inventory level determination. This makes it difficult for the firms to know
their re-order levels and quantities which may leads to shortages in inventory or keep
inventory more than needed.

Donkor, J. (2015) researched that they relied on manual methods of inventory.

Owners or managers experience was found to be more important than application of
theories of both inventory and cash balances in majority of the SMEs. Some of the
companies do not know any inventory methods. Thus, most of the firms produce
according to the level of demand and other produce on their capacity. The study clearly
revealed that the SMEs do /not have efficient inventory management practices.

According to Antwi, S. (2015), even though majority of the SMEs takes stock of their
goods and services, there were no proper inventory management practices among
them. Owner managers relied on experience and best judgment to manage the
enterprise inventory. The enterprises do not use any mathematical model such as the
Economic Order Quantity to determine the re-order quantity, but rather rely on
experience and current demand to determine the re-order quantity. Although, the SMEs
regularly reviewed inventory levels and prepared inventory budgets, the ability to apply
theories of inventory management in inventory budgeting was very limited with a
substantial number of SMEs (70.9% of all SMEs) indicating that they determined their
inventory levels based on owner-manager’s experience. He concluded then that the
SMEs in Northern Region of Ghana are not good at managing their inventory since they
seemed not to have embraced and implemented efficient inventory management
routines in their business operations. This was envisaged in their low means of the
efficiency levels inventory management and their limited application of theories of
inventory management in their operations.

Accounts Payable Management Practices

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Merchandising Small and Medium Enterprises in Tuguegarao City | 6
 Very few studies have been conducted on the accounts-payable practices of SMEs.
Accounts payable is defined by Gitman (2003) as an entity’s obligation to settle its short-
term liabilities to its creditors arising from the purchase of products or services rendered
on credit. Petrus (2009) enumerated some of the best practices in managing accounts
payable which includes collecting from debtors before paying creditors, negotiating for
favorable credit terms, delaying payment to the last day of the credit period, and taking
advantage of discount facilities by paying creditors promptly. Alipour (2011) explicated in
the results of research that there is a direct significant relation between number of day’s
accounts payables and profitability. Also, the results of his research show that in the
studied companies, there is a significant relation between working capital management
and profitability and working capital management has a great effect on the profitability of
the companies. Mbroh and Attom (2012) contend that accounts payable are a major
source of short-term financing for businesses provided that they delay payment as long
as possible without damaging their credit rating or pay on the last day when payment is
due to take advantage of cash discounts. Settling payables on the last day of payment
would then enables businesses to re-invest the funds that would have been paid to
suppliers (in the case of cash purchases) into the business, thereby securing an interest-
free short-term loan, provided cash discounts are not forfeited.

Return on Assets
Past research uses different variables to measure the financial performance of a
business specifically its profitability. Some use gross profit, others use net income, but
the commonly use is the return on asset which measures the how efficient the company
in employing their asset. The research of Taani (2012) which aims to determine the
impact of working capital on financial performance used ROA and ROE (Return on
Equity) as basis for measuring the financial performance, the study found out that
working capital management policy has no impact on ROA. The research of Harissa
(2017) which aims to investigate the effect of working capital management on
performance of Small and large firms in Malaysia used ROA in measuring the firm’s
performance. Also, the research of Jagongo (2013) used ROA in analyzing the effect of
working capital management in firm’s profitability.

Research Paradigm

Independent Variable Dependent Variable

WorkingCapital
Business Management Return on
Characteristics Practices Assets

This diagram shows how working capital management practices influences the growth of
merchandising Small and Medium Enterprises (SMEs).

METHODS
Research Design

The study used quantitative research design.

The Influence of Working Capital Management Practices in the Growth of

Merchandising Small and Medium Enterprises in Tuguegarao City | 7
Locale of the Study

This study was conducted within the City of Tuguegarao.

Respondents of the Study

The respondents of the study composed of 36 merchandising SMEs located

within the City of Tuguegarao. The merchandising SMEs used as samples are identified
using random sampling.

Data Gathering Instrument

Data collection was carried out through distribution of questionnaires among

merchandising Small and Medium Enterprises in Tuguegarao. The questionnaire has
three (3) parts. The first part gathered information about the characteristics of the
selected merchandising SMEs. The second elicited information about the practices of
the business related to working capital management in which the questions were lifted at
the study entitled The Working Capital Management of Small, Medium and Micro
Enterprises in the Cape Metropole by Enow Samuel Tabot. The third part computed for
the Return on Assets of the SMEs in which the Financial Statements of the respective
merchandising will be used to identify the net income and total assets.

Data Gathering Procedure

Initially, a requester letter was signed from the office of the Vice President for
Academics. The letter was signed and noted by the research advisers and SABH
Academic Dean upon approval. A request letter was sent to Department of Trade and
Industry – Region II to have the list of Small and Medium Enterprises for the
determination of which SME will be chosen as the respondent. The researchers
personally administered the questionnaire among the respondents and retrieved the
same. The Financial Statements of the merchandising SME will be reviewed to identify
their net income and total assets for the past three (3) years to present. After the
questionnaires was retrieved, the data was collated, tallied and interpreted using the
appropriate statistical tool.

Data Analysis

Descriptive statistics was uses such as frequency and percentage to determine

the business characteristics. Meanwhile, Pearson Correlation was used for data analysis
to determine if there is a significant relationship between the WCM practices of
merchandising SMEs and its Return on Assets. Kruskal Wallis Test was used to
determine if there is significant difference on the Return on Assets when grouped
according to business characteristics.

RESULTS

Table 1: Business Profile

The Influence of Working Capital Management Practices in the Growth of
Merchandising Small and Medium Enterprises in Tuguegarao City | 8
 VARIABLES FREQUENCY PERCENTAGE
Type of Ownership
Sole Proprietorship 25 69.4
Partnership 5 13.9
Corporation 6 69.4
TOTAL 36 100
Duration of Business
3 years – 5 years 14 38.9
5 years – 7 years 9 25.0
7 years ad above 13 36.1
TOTAL 36 100
Number of Employees
0–5 18 50.0
6 – 10 13 36.1
11-15 1 2.8
16 and above 4 11.1
TOTAL 36 100
As shown in the table, of the total respondents, 69.4% were sole proprietorship.
38.9% have been operating for 3 years to 5 years. And as to the number of employees,
50% of the businesses employ up to 5 employees.

Table 2: Cash Management Practices

As shown in the table, majority of the SMEs has a bank account with a
percentage of 72%. Only 14 of them has a monthly reconciliation of cashbook with bank.
86% normally experience cash surplus and only 5 of them is investing in marketable
securities.

Table 3: Receivable Management Practices

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Merchandising Small and Medium Enterprises in Tuguegarao City | 9
 The table shows 67% of the businesses sell goods on credit but only 14 of them
review the level of percentage of bad debts.

Table 4: Inventory Management Practices

The findings in the table shows that 22% of the respondent used inventory theory
in determining the inventory levels and only 1 of them uses economic order quantity.

Table 5: Accounts Payable Management Practices

The Influence of Working Capital Management Practices in the Growth of

Merchandising Small and Medium Enterprises in Tuguegarao City | 10
 As presented in the table, 94% of the SMEs purchased on cash basis, on the
other hand, credit purchases has a percentage of 72%.

Table 6: Relationship between the WCM practices of SMEs and the growth of SME
as to return on assets.

*Significant at 0.05 level

The table shows that all of the P Values are more than 0.05 giving no significant
relationship between the WCM practices of SMEs and the growth of SME as to Return
on Assets.

Table 7: Significant Difference on the Return on Assets when grouped according

to OWNERSHIP

Null Hypothesis Test Significance Decision

The distribution of year 1 ROA Independent- 0.443 Retain the null
is the same across categories Samples hypothesis
of ownership Kruskal
Wallis Test
The distribution of year 2 ROA Independent- 0.254 Retain the null
is the same across categories Samples hypothesis
of ownership Kruskal
Wallis Test
The distribution of year 3 ROA Independent- 0.280 Retain the null
is the same across categories Samples hypothesis
of ownership Kruskal
Wallis Test
*The significance level is 0.05
The table shows that there is no significant difference on the Return on Assets on
year 1, year 2 and year 3 when grouped according ownership.
The Influence of Working Capital Management Practices in the Growth of
Merchandising Small and Medium Enterprises in Tuguegarao City | 11
Table 8: Significant Difference on Return on Assets when grouped according to
DURATION OF BUSINESS

Null Hypothesis Test Significance Decision

The distribution of year 1 ROA Independent- 0.276 Retain the null
is the same across categories Samples hypothesis
of duration of business Kruskal Wallis
Test
The distribution of year 2 ROA Independent- 0.249 Retain the null
is the same across categories Samples hypothesis
of duration of business Kruskal Wallis
Test
The distribution of year 3 ROA Independent- 0.269 Retain the null
is the same across categories Samples hypothesis
of duration of business Kruskal Wallis
Test
*The significance level is 0.05
The table shows that there is no significant difference on the Return on Assets on
year 1, year 2 and year 3 when grouped according duration of business

Table 9: Significant Difference on Return on Assets when grouped according to

NUMBER OF EMPLOYEES

Null Hypothesis Test Significance Decision

The distribution of year 1 ROA Independent- 0.445 Retain the null
is the same across categories Samples hypothesis
of number of employees Kruskal Wallis
Test
The distribution of year 2 ROA Independent- 0.325 Retain the null
is the same across categories Samples hypothesis
of number of employees Kruskal Wallis
Test
The distribution of year 3 ROA Independent- 0.282 Retain the null
is the same across categories Samples hypothesis
of number of employees Kruskal Wallis
Test
*The significance level is 0.05
The table shows that there is no significant difference on the Return on Assets on
year 1, year 2 and year 3 when grouped according number of employees.

DISCUSSION

The results revealed that majority of the respondents constitute of merchandising

firms owned by sole proprietors in which duration varies. Half of them employ 5-10
personnel. Tabot (2015) also showed that most SMEs consist of 1-5 employees of 2-5
years old. It also denotes that given that they were operating for 2 years or more, they
are expected to have developed sound working capital management.
Majority of the businesses have bank account however most of them failed to prepare a
monthly reconciliation of cash book with bank. This implies that they cannot provide
accurate balances in their cash account. Also, some of the enterprises experienced cash
The Influence of Working Capital Management Practices in the Growth of
Merchandising Small and Medium Enterprises in Tuguegarao City | 12
surplus but only few of them invested in marketable securities. This revealed that SMEs
failed to use their cash in a gainful manner. In agreement to the study of Turyahbwa, A.
(2013), few SMEs that have cash surplus do not invest in marketable securities in order
to generate more income and this practice hinders their growth which eventually leads to
their failure. Most of them sells goods on credit however limited reviews the levels of
percentage of bad debts. It is concluded that they lacked efficient practice in managing
their receivables. As observed by Ndagujimana, J. and Okech, T. (2014), developing and
maintaining receivable schedules and regular review of receivables including customer
statements and implement policies to ensure timely and efficient collection of
outstanding accounts are necessary.The result of the study finds out that most of the
SMEs favor cash purchases than credit purchases. The SMEs prefer to have a business
relationship to the supplier. In contrary with the study of Deloof (2003) and Raheman and
Nasr (2007) , SMEs withhold their payments to the suppliers so as to take advantage of
cash available to their working capital needs. Out of the businesses who determined
their level base on the theory of inventory only one of them used economic quantity
model in inventory management even businesses review inventory level there is a
chance that the inventory level is not correct.. The risk of minimizing an inventory down
to a level close to zero is that it increases the possibility of running out of materials
needed in the production or running short of finished goods during a high demand
(Donkor,2015)

CONCLUSION

The working capital management practices of the merchandising small and

medium enterprises in Tuguegarao City do not influence the growth of SMEs as to return
on assets. Also, there is no significant difference on the Return on Assets when grouped
according to business characteristics.

RECOMMENDATION

The limitations of this study present potential areas for future research. From the
research findings and conclusion, there were identified gaps that further research could
fill.
Although the sample size of this study was deemed appropriate, future research
should use bigger sample sizes in order to have more generalizable results. Also, further
research should include other nature of business such as servicing and manufacturing.
Most of the questions used in the study to determine working capital management
practices of Small and Medium Size Enterprises were based on “yes” or “no” questions,
further research could use five-point Likert scale questions or open-ended interviews to
obtain an in-depth understanding of the working capital management practices of SMEs.
This study uses return on assets as a measurement of growth of the merchandising
small and medium enterprises whereas future research may use net profit margin, gross
profit margin and operating profit margin.

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QUESTIONNAIRE

Dear Respondents:

Greetings!

We, the Fifth - Year students of Bachelor of Science in Accountancy of University

of Saint Louis Tuguegarao, are currently conducting a research entitled “The Influence of
Working Capital Management Practices to the Growth of Merchandising Small and
Medium Enterprises (SMEs) in Tuguegarao City”. You are chosen as the respondents of
the aforementioned research.
In this connection, kindly accomplish the questionnaire as honestly and
accurately as possible. Rest assured that your anonymity and any of the information will
be treated with utmost confidentiality.
Thank you for your consideration.

Very truly yours,

Mae Flor Tagal LhennedyTamaray Annalee Jane Valdez Jaypee Zinampan

Researchers

Noted by:

Gladys T. Tumbali
Research Adviser

Part I. Business Profile

1. What is the characteristic of the SMEs as regards to:

Type of ownership:
□ Sole proprietorship
□ Partnership
□ Corporation
Duration of business:
` □ 3 years – 5 years
□ 5 years – 7 years
□ 7 years and above
Number of Employees:
□0–5
□ 6 – 10
□ 11 – 15
□ 16 and above

The Influence of Working Capital Management Practices in the Growth of

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Part II. Working Capital Management Practices
Direction: Shade the circle that corresponds to your answer.

CASH MANAGEMENT PRACTICES

YES NO
1. The business has a bank account O O
2. The business normally experiences cash shortage O O
3. The business sells goods or services cash by cash O O
4. The owner/manager is involved in preparation of the cash budget O O
5. Cash budget is helpful in decision in making O O
6. The business sets the minimum cash balance based on owner’s
O O
experience
7. The business has set minimum cash balance O O
8. There is monthly reconciliation of cashbook with bank O O
9. Temporary cash surplus is invested in marketable securities O O
10. The business reviews the cash budget O O
11. The business prepares a cash budget O O
12. The business has internal controls on cash O O
13. There is separation of cashier personnel from accounting duties O O
14. The business sets the minimum cash balance based on historical data O O
15. The business normally experiences cash surplus O O
16. The business sets the minimum cash balance based on a theory O O
17. The business uses computer assisted software in preparing a cash
O O
budget

RECEIVABLE MANAGEMENT

YES NO
1. The business sells goods/services on credit O O
2. There is control over sales to employees O O
3. The sales are reconciled with inventory change O O
4. There is periodic preparation of aging schedule O O
5. The business reviews the levels of percentage of bad debts O O
6. There is control over collections of written-off receivables O O
7. The business has set a credit policy in place O O
8. The business applies the set credit policy while extending credit O O
9. The business reviews the levels of receivables O O
10. The business uses computer assisted software in managing receivables O O

ACCOUNTS PAYABLE MANAGEMENT

YES NO
1. The business purchase on credit O O
2. The business purchase on cash O O
3. The business take advantage of discount facilities by paying creditors
O O
promptly
4. The business settle accounts payable on the last day that the payment is
O O
due
5. The business use computers to manage accounts payable O O

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 INVENTORY MANAGEMENT

YES NO
1. There is physical safeguards of inventory against theft O O
2. Inventory levels are determined based on owner’s experience O O
3. There is use of standard cost O O
4. There is periodic review of overhead rates O O
5. Periodic summaries of inventory usage are prepared and used O O
6. There is proper authorization for purchases O O
7. There is periodic counts O O
8. There is use of inventory requisitions O O
9. There is physical safeguards of inventory against fire O O
10. The business investigates discrepancies in inventory O O
11. The business reviews inventory levels O O
12. The business prepares inventory budget O O
13. The business computes inventory turnover ratios O O
14. The business uses Economic Order Quantity model in inventory
O O
management
15. Inventory levels are determined based on historical data O O
16. Inventory levels are determined based on the theory of inventory O O
17. The business uses computer assisted software in recording inventory O O

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