Republic of the Philippines

CAVITE STATE UNIVERSITY

Don Severino delas Alas Campus
Indang, Cavite

COLLEGE OF ECONOMICS, MANAGEMENT, AND DEVELOPMENT STUDIES

ASSOCIATION OF CASH MANAGEMENT PROCEDURES OF MICRO

BUSINESS ENTERPRISES AND THEIR PROFITABILITY:
A BUSINESS ENTITY COMPLIANCE

Research Topic

FINANCIAL MANAGEMENT PRACTICES AND FINANCIAL

ACCOUNTING STANDARDS COMPLIANCE:
CASE OF MSMEs IN THE NORTHERN PHILIPPINES

Research Topic’s Related Local Literature

BS ACCOUNTANCY 3-1
Burgos, Maryden Ley V.
Gayo, Tamarra Cashmiere B.
Pilapil, Jean M.
Tarsenio, Raegun G.

Mr. Arjel Galias

Statistical Analysis with Software Application
Department of Physical Science
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas Campus
Indang, Cavite

ABSTRACT

Starting a business may seem manageable, but many struggle to keep running in the
long term. This study looks at how much Micro, Small and Medium Enterprises (MSME)
owners in Ilocos Norte, Philippines, understand and follow Financial Accounting Standards
(FAS) and Financial Management Practices (FMP). It also explores the connection between
FAS, FMP, and business success. The study used a descriptive and correlational approach,
gathering data from 379 MSMEs through survey questionnaires. A 4-point Likert scale was
used to analyze the answers, and regression analysis with International Business Machines
Statistical Package for the Social Sciences (IBMSPSS) was used to see how MSMEs’
financial performance relates to their FMP and FAS compliance. The results showed that
MSMEs in Ilocos Norte follow financial management practices and financial accounting
standards at a moderate level, focusing mainly on the Statement of Comprehensive Income. It
also found a strong link between how well MSMEs manage their finances, follow accounting
standards, and how successful they are. This shows that good financial management can help
improve business performance.

STATISTICAL ANALYSIS

What? The study employed the Regression Analysis under the International Business
Machines Statistical Package for Social Science (IBM SPSS), commonly known for
providing advanced statistical analysis. This method is commonly used to examine the
relationship between one dependent variable along with two or more independent variables.
Based on the study, the dependent variable is the financial performance of MSMEs, while the
independent variables are the financial management practices (FMP) and compliance with
financial accounting standards (FAS). This aims to test whether there is a relationship
between MSMEs' financial performance to their FMP and compliance with FAS.
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas Campus
Indang, Cavite

The study also mentioned using the Chi-square test specifically the Chi-square test of
independence under the Data Analysis section. This method is a statistical hypothesis test
used to determine whether the distribution of one variable is independent of the distribution
of the other by comparing the observed frequencies within each category to the expected
frequencies in a contingency table. It is important to note that for the test results to be
reliable, each category must have an expected frequency of five or more. Additionally, the
researchers used Excel for checking any inconsistencies ensuring the data gathered were
accurate and free from errors.

Figure 1.

Why? The study aims to evaluate the usage of Financial Management Practices
(FMP) by the Micro, Small, Medium Enterprises (MSMEs) in Ilocos Norte; to analyze the
compliance level of MSMEs with the Financial Accounting Standard (FAS); and at the same
time to find out if there is a significant relationship between financial practices and their
compliances to the financial performance and success of the business. In relation to this, the
researchers used the Chi-square Test and Regression Method as their statistical analysis
techniques in conducting the study.
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas Campus
Indang, Cavite

The study used a Chi-square Test to evaluate the relationship between FMP,
compliance with FAS, and the performance of the business. This technique is mostly used as
a preliminary stage before conducting a more complex method (e.g. Regression Method) to
find if a relationship exists between categorical variables. This technique is a foundational
test for categorical data analysis, it often serves as a tool within regression analysis when
dealing with models that involve categorical variables.

Aside from the Chi-square Test, the researchers also used the Regression Method as
their statistical technique to further quantify the relationship between FMP and FAS
(independent variables) and the business performance (dependent variable). This statistical
method allows for better insights into how independent variables influence the dependent
variable. This technique also helps the researcher determine whether the relationships found
are statistically significant.

How? The researchers applied the 4-Likert Scale as their research instrument to
measure the compliance level of their respective respondents (Micro, Small, and
Medium-sized Enterprises) to the Financial Management Practices and Financial Accounting
Standards. They have provided a Mean Range to better analyze the level of the results. This
Likert Scale is only a research instrument to quantify the level of the verbal interpretation of
the responses in the survey (G-FORM) form used by the researchers which will be utilized
further in their statistical analysis tool.

Figure 2.
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas Campus
Indang, Cavite

The researchers interpreted and analyzed a total of six (6) categories of Financial
Management Practices. The researchers, through a survey questionnaire utilizing likert scale
wherein each response has an equivalent range, determined how well the respondents practice
in their daily operations such activities in terms of Asset Management, Cash Management,
Receivables Management, Inventory Management, Payables Management, and Financial
Planning. To further dig on how these researchers interpreted the results, take a look at Figure
3.

Figure 3.
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas Campus
Indang, Cavite

It’s obviously given that there is more than one respondent in this research, especially
that it’s a quantitative research. This research included 379 MSMEs, hence, a question lies
within the only one interpretation given per indicator: why is that so? As you can see, the
researchers incorporated a computation of Mean Range, as already mentioned earlier. From
reading their findings and researching the overall idea of Likert Scale, we were able to find
out that each Likert Scale’s Range are being computed depending on the research’s demands.
Then, to properly compress the results into one interpretation, the researchers had to compute
for the “mean,” therefore, all the equivalent ranges of the answers of the respondents per
indicator will be summed up and then, divided by 379 which is the total number of
respondents; same procedures are done to come up with the Composite Mean. With that, the
researchers will eventually come up with the average level of compliance of MSMEs per
indicator and for the overall specific category of Financial Management Practice involved, in
the case of Receivables Management, it was found out that it was moderately practiced from
the computed mean of 2.75.

Moreover, since this research have two independent variables involved, the
researchers created more than one Likert Scale but this time with different response modes
and interpretations. Moving forward, to finalize the data analysis, the researchers conducted a
Chi-square Test of Independence to further analyze the association of those categorical
variables. Once the Chi-square Value was computed through the use of International Business
Machines Statistical Package for Social Science (IBMSPSS), it’s further analyze once the
P-Value was obtained since this value shows the statistical significance of the relationship of
the variables. If the P-Value is less than 0.05 then, the two variables have significant
relationship; and, as you can see in the Figure 4 above, there’s definitely a statistical
significant relationship between the Financial Management Practices and Compliance with
Financial Accounting Standards with the Financial Performance (in annual income) of the
379 MSMEs.
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas Campus
Indang, Cavite

Once found that the variables have significant relationship in general, the researchers
followed up with the Regression Analysis to determine how the independent variable strongly
affects the dependent variable. Regarding the dependent variable, in this research it is the
Financial Performance of the MSMEs quantified through their specific ranges of annual
income.

Figure 4.