St.

Paul University Philippines

Tuguegarao City, Cagayan 3500

1 inch

WORKING CAPITAL MANAGEMENT AND PROFITABILITY

OF JR’S FARM EGGS IN SOLANA CAGAYAN

1 inch
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_______________________

A Research Proposal Presented

to the Faculty of the Graduate School

St. Paul University Philippines

Tuguegarao City, Cagayan

_______________________

In Partial Fulfillment

Of the Requirements for the Degree

MASTER OF BUSINESS ADMINISTRATION

________________________

DR. CHARITO GUILLERMO

SECOND SEMESTER 2020-2021

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Chapter 1

THE PROBLEM AND REVIEW OF RELATED LITERATURE

Introduction

Agricultural business, also known as

agribusiness, is the farming, management, production, and

marketing of agricultural commodities, such as livestock

and crops. The agricultural business field includes

resource management, farming, conservation, ranching, and

sales. As technology has progressed and markets have become

increasingly global, agricultural business has developed to

meet and solve high-tech farming needs and problems.

Modern farming, including raising crops for food and

fuel, and raising animals for food, wool, and more, is a

complex industry. As farmers learn to compete and remain

viable in a global marketplace, they draw upon business

principles and a complex network of agriculture and

business professionals. This includes taking advantage of

new advances in farming, such as bioengineering,

mechanization, and new breeding practices, deciding how to

sell crops, whether locally or on a commodities exchange,

and managing and insuring land in the most profitable

manner. As an agricultural business professional, you might

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work in any of these areas, either as a farmer or as a

business professional supporting farmers.

In the country’s second geographical region (from

Nueva Vizcaya to Cagayan province up north) lies vast

agricultural lands, Nueva Vizcaya, otherwise known as

“gateway” to the valley, has other flagship crops, like

oranges, pineapples, salad vegetables, cut-flowers,

mangoes, livestock and fish farming, while Quirino, Isabela

and Cagayan provinces produce substantial corn and tobacco

harvests. Isabela is now dubbed as the Corn Capital of the

Philippines. (L. Perante II, 2017)

Livestock and poultry were the strongest sources of

growth in Philippine agriculture from 1986 to 2000. At the

farm level, livestock raising is a major activity in rural

areas. For a large proportion of smallholder households

engaged in livestock raising, the activity is the primary

source of income (UPLB-IFPRI-ILRI livestock household

survey, 2000).

Livestock production in the Philippines in general has

continued to be the domain of smallholders. In the hog

industry, 77 percent of hog inventories remain in backyard

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production systems. However, significant market and

institutional changes are taking place in the major regions

where hog and poultry production is undertaken. Within the

broiler sector, the large integrators, with their

vertically coordinated operations, have come to dominate

the industry. Industry players estimate that 80 percent of

broiler meat output is now turned out by growers under

contract to the large integrators, with the remaining 20

percent produced by independent commercial farmers and a

handful of smallholders (focus interviews with broiler

industry players, 2002). In the hog industry, a rapid

scaling-up is under way in the country's major hog

producing regions. Commercial farm inventories have now

matched, if not surpassed, backyard hog inventories

(Costales, 2002). The scaling-up of broiler and hog

production systems raises questions about the continued

ability of smallholders to participate in an industry that

is experiencing robust growth.

The changing market shares of small-scale and large-

scale producers in poultry and pork markets suggests a

displacement of smallholders. Yet the poverty implications

of such a displacement raises important social questions.

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To respond to those questions, it is important to

determine, and if possible take hold of, the forces driving

smallholder displacement.

Increasingly, the impact of industrial livestock

production on the environment is becoming an important

social concern (Catelo et al., 2001). Social conflicts are

emerging over the location of large-scale livestock

production close to residential centers. Environmental

regulations against pollution, traditionally targeted

against heavy and light industries, are now also being

trained on industrial livestock production. More recently,

regulatory authorities have begun contemplating the

regulation of livestock waste, even for smallholder farms

(Laguna Lake Development Authority, 2001). As more even-

handed enforcement of environmental regulations comes into

place, it is necessary to determine how such enforcement

would differentially affect the viability of small- and

large-scale farms.

There are two concepts of working capital. One is the

accountant view which defines working capital as current

assets minus current liabilities, which in other words is

called net working capital. The second one is the financial

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view which defines working capital as the total amount of

investment in current assets of a business, which in other

words is called gross working capital. Though the

accountant takes working capital as the surplus of the

total amount of investment in current assets of a business

over the current liabilities incurred, in this study,

working capital is defined as the total amount of

investment in current assets available for the daily

operations of the business or for conversion of raw

materials into finished goods which the business sells to

generate cash flows.

By definition, working capital is current assets,

which can be turned to cash in one year or less, minus

current liabilities due within one year. Working capital

measures financial liquidity, which is the ability to sell

assets without disrupting normal business operations.

Current assets include cash, crops growing in the

field (often valued at the cost of inputs or the level of

crop insurance), and inventory, i.e. corn and soybeans in

the bin or livestock to be sold. Marketing plans including

options or hedging contracts can be valuable in

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ascertaining inventory value. Accounts receivable that are

collectable and prepaid expenses.

On the current liability side, accounts payable, i.e.

feed, fertilizer, repair or vet bills, etc., and accrued

expenses, that is, wages and taxes payable are included.

Also, principal reduction of intermediate and long-term

debt due within the next 12 months is included.

Working capital is the cash a farm has to finance its

operations. It is usually thought of in terms of being the

amount of money that the farm has available to finance

operations for the next year. Working capital that is

greater than the operating expenses required for the next

year usually translates into cash flow, which is easier to

manage.

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1.1 REVIEW OF RELATED LITERATURE AND STUDIES

To gain better knowledge and understanding regarding

Working Capital Management and Profitability in Agriculture

business, different concepts relevant to the study are

gathered by the researcher.

Cagayan Valley: Grains Granary of the Philippines

Landlocked on the west by the Cordilleras, at the

southern border by the Caraballos and on the eastern side

by the Sierra Madre mountain range is the Cagayan Valley

region.

In the country’s second geographical region (from

Nueva Vizcaya to Cagayan province up north) lies vast

agricultural lands, Nueva Vizcaya, otherwise known as

“gateway” to the valley, has other flagship crops, like

oranges, pineapples, salad vegetables, cut-flowers,

mangoes, livestock and fish farming, while Quirino, Isabela

and Cagayan provinces produce substantial corn and tobacco

harvests. Isabela is now dubbed as the Corn Capital of the

Philippines.

But while these provinces in the Northeastern Luzon

block excel in their respective agricultural products, rice

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farming stands out as a common denominator.  The National

Irrigation Administration (NIA) confirmed that some 139,000

hectares of the region’s total land area are planted to

rice. The construction of the Magat Multipurpose Dam has

provided a steady irrigation for rice farms in Isabela,

while Cagayan river irrigates the northernmost province in

Luzon mainland.

Today Cagayan Valley has emerged as the country’s

grains granary. And of all the provinces in the region’s

finest eating quality rice—dubbed as “Vizcaya Rice”. How it

gained this reputation goes way back in history.

During the pre-Spanish era, Nueva Vizcaya’s rolling

landscape was inhabited only by the indigenous head-hunting

Bungkalot, Ifugao and Igorot tribes. When Spanish

colonizers discovered the place, it was named after the

people living in the coast of Mar de Vizcaine in Spain. In

the beginning of the 19th century, it was a part of the

vast Territorio de Missiones of the Spanish-controlled

government of Cagayan. The territory covered eastern half

of Northern Luzon from Nueva Ecija to Aparri, including the

Batanes Islands. (L. Perante II, 2017)

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Livestock and Poultry in Cagayan Valley Region

The total volume of livestock production in January to

June 2018 was estimated at 47,158 metric tons. This was

3.71 percent lower than the 2017 production of 48,973

metric tons. Carabao, Cattle and Swine production posted

negative growth this year at 5.44 percent, 4.13 percent and

3.60 percent, respectively. These three animals contributed

in the reduction of the 2018 production by 1,869 metric

tons. On the other hand, goat production expanded by 7.14

percent.   

Among the five provinces of the region, Isabela had

the biggest share of production during the semester which

accounted 40.74 percent of the total Livestock production,

followed by Cagayan with 40.29 percent. The province of

Batanes had the least share accounting for only 0.54

percent.

As of July 1, 2018, the total Cattle and Swine

inventory posted an increase of 1.80 and 4.59 percent

respectively compared with stocks of the same period the

previous year. Both increases were attributed to upward

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inventory in backyard and commercial farms of Cattle and

Swine in the region. On the contrary, declining inventory

was noted in Carabao and Goat which is down by 1.81 percent

and 2.93 percent respectively. Both decreases were

attributed to decreasing inventory of backyard farms of

Carabao and Goat in the region albeit expansion of

commercial farms.

The total volume of poultry production in Cagayan

Valley for the first semester of 2018 dropped by 159 metric

tons as compared to same period of last year. The negative

growth in poultry output was significant in chicken

production which is short by 592 metric tons or 1.99

percent lower than what was attained in 2017 registered at

29,688 metric tons. Duck Egg production also pulled down

poultry output by 144 metric tons or 8.57 percent behind

the 2017 production of 1,680 metric tons. Positive output

in Duck and Chicken Egg was not enough to overturn the

total poultry production as it gained only 115 metric tons

for Duck and 462 metric tons for Chicken Egg.

Across provinces, the province of Isabela is the top

contributor in terms of poultry production during the

period with a share of 59.07 percent. Meanwhile, Batanes is

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the least contributor accounting for only 0.13 percent to

the total poultry production output of the region.

As of July 1, 2018, total chicken inventory in the

region reduced by 9.08 percent. Specifically, the reduced

inventory was notable in broiler and duck commercial farms

at 50.24 percent and 11.28 percent respectively – Broiler

farms shrunk by 1,394,433 birds while duck commercial farms

dropped by 13,733 birds. The decrease in inventory of these

two farms was too big to overcome by the increase in

inventory of Native/Improved Chicken (12.71 percent or

579,852 birds), Layer farms (11.31 percent or 82,008 birds)

and Duck backyard farms (3.42 percent or 35,079 birds).   

The Livestock and Poultry Situationer presents the

performance situation in terms of inventory of carabao,

cattle, swine, goat, chicken and duck; and volume of

production including chicken and duck eggs. Moreover, data

for this special release were collected by the Philippine

Statistics Authority (PSA) though the two (2) major

surveys, namely: a) The Backyard Livestock and Poultry

Survey (BLPS) which conducted quarterly  covers one (1) of

the four (4) replicate samples of the Palay and Corn

Production Survey (PCPS), and b) The Commercial Livestock

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and Poultry (CLPS), also conducted quarterly covers 29

swine farms, 5 layer farms and 20 broiler commercial farms

and contract growers as of July 1, 2018.

Another survey that supplements the data requirements

of the Livestock and Poultry sector is the Survey of

Slaughterhouses and Poultry Dressing Plants (SSHDP). This

is done monthly and utilizes administrative data from

Locally Registered Meat Establishments (LRMEs) in the

province which is in coordination with the Provincial

Veterinary Office (PVO) and Meat Inspectors (MIs). (M.

Estrada, 2018)

The Chicken: Classes, Breeds and Varieties

The chicken is the most exploited species of poultry,

which is utilized for food production in the whole world.

Scientific researchers have been done on this species for

past centuries and it is still the focus of the present and

future experimentation. In the Philippines chicken rank

first, while ducks rank second in economic importance as

source of meat and eggs.

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Breed of Chicken can be classified by its utility.

This is based on the purpose for which the breed or variety

is most efficient.

Egg Class. The breed belonging to this class is

characterized by their comparatively small size. They lay

large white shelled eggs, very active and nervous in

temperament. They are non-sitters. The earlier selection of

geneticist for this class showed record of early maturity

that may not necessarily be true with the modern breeds

under this class. Examples: Leghorn, Minorcas, Anconas,

Mikawa.

Meat Class. This class belong the breeds that are

large, slow movement, quiet and gentle in disposition.

Geneticist of the past described them as relatively slow

maturing which may not hold true anymore with the present

meat breeds. They are generally poorer egg layers and

generally lay brown shelled eggs. Examples are: Brahmas,

Cochin,Langshans, Comish, White Rocks.

General Purpose Class. Breeds of Chicken in this class

are medium sized good layers and the young are fast

growers. They are not s nervous as the egg class but much

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more active than the meat class. Examples are: New

Hampshire, Rhode Island Red, Plymouth rock, Lancaster,

Nagoya, Cantonese.

The general purpose breeds had its popularity period

when the idea of the poultry breeder was to hit both

products of eggs and meat in one kind of breed. Later

developments proved that specialization of breed purpose is

better goal for more efficient production. The general

purpose class at present has been modified and developed by

breeders in the production of broiler chicks.

Fancy class. The breeds under this class may be

characterized as possessing decided beauty of plumage or

form of having a rare unusual appearance. Most of them are

raised chiefly as ornamentals or pets by hobbyists,

regardless of their value as source of food. Example:

Frizzle, Bantams, Long tailed.

Fighting Class. Since this sport is now legalized in

the Philippines it should revolutionalize the original

vision that fighting cock breeds has no place place in this

study. There are groups of this kinds of chickens now

developed by national and international aficionados in this

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game. Since there are no studies conducted on the breeding

and raising of these game fowls, the LAS could not profess

any knowledge of what kind and what process of raising will

assure a cock to win in the fight. The popular ones are the

Ruble, Hulsay, Claret, Oasis.

1.2 CONCEPTUAL FRAMEWORK OF THE STUDY

Demand is driven by food prices and consumption

trends. The profitability of individual farms depends on

efficient operations and anticipating market demand. Large

companies have advantages in vertically integrated

operations and economies of scale. Small operations can

compete effectively by specializing in certain breeds,

supplying local markets, or raising humanely treated or

hormone-free animals. The US industry is concentrated: the

top 14% of companies account for about 75% of revenue.

Farms and ranches in the industry produce chickens

(67% of industry value of production), turkeys (16%), and

eggs (17% of revenue). Companies typically raise poultry

for slaughter or for egg production, though some farms are

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dedicated hatcheries. Others focus on duck, ostrich, emu,

pheasant, geese, or quail production.Working capital

management has an important role to play in the success of

any business enterprise. Over 75% of companies that are

running at loss or struggling financially would be

profitable and liquid if were more disposed to the

knowledge and practice of efficient working capital

management.

Therefore, the aim of working capital is to optimally

manage current assets and current liabilities such that an

acceptable level of net-working capital can be achieved.

Thus, net working capital is the mathematical difference

between current assets and current liabilities of an

organization. If a firm cannot maintain a satisfactory

level of net working capital, it would be insolvent and if

not corrected would be commensurate with bankruptcy.

1.3 RESEARCH PARADIGM

Independent
WorkingVariable
Capital Dependent Variable
Management Practices PROFITABILITY (Net

1. Cash Management Interest Margin)

2. Receivables

Management

3. Inventory Management
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The paradigm shows the independent and dependent

variable of the study. The Independent variable is the

Working Capital Management practices adapted by JR’s Farm

Eggs through Cash, Receivables, Inventory and Asset

Management. On the other hand the dependent variable is the

profitability of the business measured using Net Interest

Margin.

1.4 STATEMENT OF THE PROBLEM

This study aims to investigate how the participants make

decisions for efficient and effective management of its

funds to accomplish the objectives of the organization.

Specifically, it will seek to answer the following

questions:

1. What is the profile of the business enterprise in terms

of the following?

1.1 Nature of business operation

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1.2 Year of establishment

1.3 Number of employees

1.4 Current Capitalization

2. What are the strategies adopted by the management as to

the following:

2.1 Cash management

(1) Forecasting,

(2) Mobilizing and managing the cash flow,

(3) Maintaining banking relations, and

(4) Investing surplus cash.

2.2 Receivables management

2.3 Inventory management

2.3 Asset management (fixed assets)

3. What are the problems encountered by the management as

to the following:

3.1 Cash management

3.2 Receivables management

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3.3 Inventory management

3.4 Asset management (fixed assets)

4. What are the sources of financing of the company? How

often do they resort to such kind of financing?

5. What are the strengths, weaknesses, opportunities, and

threats of the business enterprise?

6. What were the recent financial decisions made by the

management? How have these decisions affected the entity?

Which of these decisions do you support, and which of these

you don’t agree with? Why do you agree and why you do not?

7. What are the recommendations to improve the Financial

Management of the entity

1.5 HYPOTHESIS

Null Hypothesis (Ho): There is no significant

relationship between experience of the participants in the

industry and the successful operation of poultry business.

Alternative Hypothesis (Ha): There is a significant

relationship between experience of the participants in the

industry and the successful operation of poultry business.

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1.6 SIGNIFICANCE OF THE STUDY

Chicken broiler and egg production are the most

progressive animal enterprises in the Philippines today.

The poultry industry in fact began as the backyard

enterprise but has shifted to the formation of very large

integrated contract farming operations. This manual

provides technology and management know-how for poultry

raising which hope present poultry raisers and prospective

poultry producers may find useful in effectively managing

their poultry farms and also help them realize substantial

financial returns from their enterprise in this period or

high production cost inputs. (R. Pe, 2014)

The poultry industry is plagued with several challenges

which should be seriously looked at. This study has tried

to look at the challenges and prospects of poultry industry

so as to provide some ways of overcoming them. The study is

intended primarily, to add to existing knowledge on the

poultry industry and to serve as a secondary source of data

for further studies.

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Up and coming poultry farmers can also use the results

of the study as a guide to avoid likely pitfalls in the

poultry business.

Poultry industry is sensitive area and needs special

attention as well as knowledge to produce properly. Most

industries of poultry need professional support to protect

from bankruptcy and to expand the industry. So, a research

like this is essential and contributing for development of

poultry industry particularly in Cagayan Valley, most

poultry industries are working without well organized and

scientific way. Hence, conducting research in poultry

industry in Cagayan is very important and can play great

role on the development of the industry.

1.7 SCOPE AND LIMITATION OF THE STUDY

1. The study will only be conducted within JR’s Farm

Eggs in the municipality of Solana, Cagayan. This study

would be of practical utility to provide guidelines to

the poultry entrepreneurs. The present research

highlights the emerging trends in the growth of poultry

industry in the domestic scenario.

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2. This study would help to identify the benefits and

problems faced by the poultry entrepreneur. None of the

study has been made so far to analyze the opinion of the

poultry entrepreneur in the angle of knowledge

assessment, problems and prospects.

3. The study will help the owners of poultry farms to

introduce new technology and cost reduction egg

production.

4. The participants of the study should be the owners of

the establishment, its employees and selective

customers.

5. The present study is cross sectional in nature, which

means that data collected at a particular point of time,

thus this may not guarantee that the answers reported by

the respondent would valid for longer period. To

overcome this limitation, prospective studies or

intervention studies are needed to further validate or

prove the present results. Other factors such as time of

day, recent conflicts, fatigue of the participants are

outside the control of researchers which all could

influence the response .

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6. The information can be provided for potential

investors and small and medium farms interested in the

business so that medium and large scale poultry farms

start to emerge.

7. The major problem that the researcher encountered was

time constraint due to other assignments and the

researcher is a full time mother of two kids who needs

continuous attention.

1.8 DEFINITION OF TERMS

The terms are defined based on how they will be used in the

study.

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Animal Inventory (also, Animal Population). The number

of domesticated animals in head present in the farm at

specific reference date.

Cash Management. It is the process of collecting and

managing cash flows. Cash management can be important for

both individuals and companies. In business, it is a key

component of a company's financial stability. For

individuals, cash is also essential for financial stability

while also usually considered as part of a total wealth

portfolio.

Current Assets. It represents all the assets of a

company that are expected to be conveniently sold,

consumed, used, or exhausted through standard business

operations with one year.

Current Liabilities. It consists of short-term

financial obligations that are due typically within one

year. 

Equity. It is typically referred to as shareholders'

equity (or owners equity' for privately held companies),

represents the amount of money that would be returned to a

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company’s shareholders if all of the assets were liquidated

and all of the company's debt was paid off.

Liquidity. This refers to the ease with which

an asset, or security, can be converted into ready cash

without affecting its market price.

Livestock. Farm animals kept or raised for

consumption, work or leisure. In general, poultry is

separated as a distinct group of farm animals. For purposes

of census and surveys, livestock covers only those that are

tended and raised by an operator.

Market Value. It is the price an asset would fetch in

the marketplace, or the value that the investment community

gives to a particular equity or business. 

Net Interest Margin (NIM). This is a measurement

comparing the net interest income a financial firm

generates from credit products like loans and mortgages,

with the outgoing interest it pays holders of savings

accounts and certificates of deposit.

Poultry. A collective term for all domesticated avian

for the purpose of food consumption or, the carcass of such

avian dressed/processed for human consumption.

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Poultry Farming. Rising of birds domestically or

commercially, primarily for meat and eggs but also for

feathers.

Production. Refers to the volume of indigenous

(locally-raised) animals disposed for slaughter which

include animals exported or shipped-out for slaughter (in

“head” and in “live weight equivalent”).

Profitability. This refers to the business's ability

to produce a return on an investment based on its resources

in comparison with an alternative investment.

Return on Assets (ROA). This is an indicator of how

well a company utilizes its assets, by determining how

profitable a company is relative to its total assets. It is

best used when comparing similar companies or comparing a

company to its previous performance.

Return on Equity (ROE). It measures how effectively

management is using a company’s assets to create profits.

It is used as a measure of financial performance calculated

by dividing net income by shareholders' equity.

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Chapter 2

METHODOLOGY

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This chapter presents the research design, respondents

of the study, instrumentation, data gathering procedures

and data analysis.

2.1 RESEARCH DESIGN

This study will make use of descriptive research

design. This is the appropriate method to use since the

study will be observing a completely natural and unchanged

natural environment. The researcher will not control or

manipulate any of the variables, but will only observe and

measure them. It is necessary to observe and systematically

describe the performance of the working capital management

of Jr’s farm Eggs under investigation.

2.2. LOCALE OF THE STUDY

The study will be conducted in JR’s Farm Eggs in Basi

East, Solana, Cagayan.

2.3 RESPONDENTS OF THE STUDY

The participants of the study will be the owners

of the establishment, its employees and selective customers

of the products.

2.4 DATA GATHERING PROCEDURES

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In order to gather the needed data for the study the

researcher will do the following:

1. The researchers will seek approval to their Research

professor through an email. Due to the existing pandemic,

the researcher will only conduct a one time face-to-face

interview with the owner of the business. Social distancing

protocols have been properly observed.

2. A face-to-face interview with the owner will be held at

the owner’s establishment. The questionnaire is prepared by

the researcher and with the help of the owner, questions

are answered one by one.

3. The results of the interview will be compiled together

with the computation of the profitability of JR’s Farm Eggs

using Net Interest Margin.

4. Statistical analysis will also be done to the

profitability and working capital management ratios to

determine their relationship.

2.5 DATA ANALYSIS

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Mean and median will be used to analyze the

Working Capital Management practices of the Jr’s Farm Eggs.

Computation of the profitability will be done using the net

interest margin. Pearson-R will be used to analyze the

significant relationship between Working Capital Management

ratios and profitability of the business.

Chapter 3

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RESULTS AND DISCUSSION

This chapter reviews the results and discussion of the

qualitative data, the compilation of the interview and the

results and analysis of the quantitative findings of the

study.

3.1 BUSINESS PROFILE

3.1.1 NATURE OF BUSINESS OPERATION

Poultry farming is the form of animal husbandry which

raises domesticated birds such

as chickens, ducks, turkeys and geese to

produce meat or eggs for food.  Chickens raised for eggs

are known as layers, while chickens raised for meat are

called broilers. JR’s Farm Eggs has a total of 900 chicken

layers operating on a daily basis.

3.1.2 YEAR OF ESTABLISHMENT

The establishment was built around December 2018 and

became operational on January 2019. JR’s Farm Eggs will

commemorate their second year of business on January 2021.

3.1.3 NUMBER OF EMPLOYEES

JR’s Farm Eggs has a total of two employees. One is in

charge of waste and manure disposal. The other employee

feeds the layers twice a day, morning and afternoon. The

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owners of the establishment harvest the eggs then sort them

out according to their respective sizes.

3.1.4 CURRENT CAPITALIZATION

Jr’s Farm Eggs assets have a total of Php 474, 000 and

liabilities of Php 254, 000. The layers produce 600 eggs or

more approximately. Some layers cannot lay their eggs yet

because they are too young. Prices of eggs per tray differ

according to their sizes, from pullet size to extra large

size. Daily income of the business ranges from Php 4, 000

to Php 6, 000.

3.2. MANAGEMENT STRATEGIES

3.2.1 CASH MANAGEMENT

3.2.1.1. FORECASTING

In setting up any business, the amount or cost will

depend on the approach and scale the firm wants to

undertake. The owners discover that the cash generated by a

commercial poultry farm and egg production business depends

on the size of the poultry farm, the types of birds

available in the poultry and the size of their marketing

network.

The proprietors have been able to critically examine

the poultry farms and egg production business and have

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analyzed their chances in the industry and have been able

to come up with the following forecast. The projection is

based on information gathered on site and some workable

assumptions as well with respect to the nature of

commercial poultry farm and egg production business that

they run.

Below are the projections that the researcher was able

to come up with for the first three years of running JR’s

Farm Eggs;

Year Total Assets

January-December 2021 360,000
January-December 2022 432,000
January-December 2023 504,000

3.2.1.2 MOBILIZING AND MANAGING THE CASH FLOW

There are many components that will determine the

success of JR’s Farm Eggs business. Education, work

experience, goodwill and cash flow are key factors that

will ultimately lead to the business growth and profit. Net

income generated from the consumers will be used to pay the

business’ debts, monthly electricity and water bills, and

salaries of their employees.

The layers consume two sacks of feeds every day, the

reason why owners have to negotiate an agreement with their

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food supplier that they must first pay their debts before

consuming another set of food.

3.2.1.3. MAINTAINING BANKING RELATIONS

The owners of the JR’s Farm Eggs have no outstanding

obligations in any commercial banks in Cagayan. Although

their savings are put in banks, owners prefer to be

obligated by entities with no interest required, usually in

debt with their relatives and friends who owns a poultry

food supply. They use their bank cards for personal

consumption and not for their business.

3.2.1.4 INVESTING SURPLUS CASH

Aside from the layers, JR’s Farm Eggs intended to

broaden their business by establishing another business

line. The surplus cash will be invested in building a

rabbit farm. Owners have started building cages and buying

rabbits from rabbit breeders. Owners will only be breeders

and will not be selling rabbit meat.

3.2.2 RECEIVABLES MANAGEMENT

The consumers of JR’s Farm Eggs are fully aware of

their debts. Owners have a manual to record their

customer’s debts and must be paid in full amount not longer

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Tuguegarao City, Cagayan 3500

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than seven days. Owners firstly entertain buyers who visit

the establishment to buy trays of eggs. Their products are

fast moving, the reason why owners don’t approve

reservations.

3.2.3 INVENTORY MANAGEMENT

Inventory control for JR’s Farm Eggs owners is one

thing that needs to be done at any occasion. To ensure a

smooth progression of supply, each single part of the

inventory must be handled and monitored. So in terms of

function and operations there would be no problem with

feeding the layers.

In case of an untimely death of the layers, there are

chicks readily available for replacement.

3.2.4 ASSET MANAGEMENT

JR’s Farm Eggs requires regular account oversight and

exceptional accounting which is important for achieving a

smoother operating stream. Manual processing of asset

reports, balance sheets, and accounting books is not

possible. JR’s farm Eggs uses a software for poultry farm

management to oversee accounts minutely like ascertaining

the creation cost per egg, the chicks and layers feeds so

it is easy to distinguish where the business is lacking.

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This allows wastage to be reduced and controlled at the

right time to keep taking a shot at average net income.

Biological characteristics of chickens, high

reproductive ability, fast growth, and maximum possibility

for mechanization of the production process enabled the

poultry farming to have industrial character.

3.3 MANAGEMENT DIFFICULTIES

3.3.1 CASH MANAGEMENT

The owners of JR’s Farm Eggs did encountered a lot of

mishaps when they started establishing the business. Funds

were not enough to compensate the cages and the feeds for

the layers. Although the owner is a well-known employee of

the government, they have to gain the trusts of their

debtors for future debt transactions. Both owners rely

solely on their salaries to establish their poultry farm

and to pay their obligations from private suppliers.There

was no income for the first three months of the business

because the layers were still young and needed to lay

bigger eggs to be sold in a much higher price.

3.3.2 RECEIVABLES MANAGEMENT

Customers of the establishment has a deadline, a maximum

of seven days to complete their obligations. JR’s Farm Eggs

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do not allow debts from customers longer than seven days.

Their products are fast moving and will prefer to entertain

consumers with the amount ready for payment. Most of JR’s

Farm Eggs consumers own a panciteria which requires them to

order eggs from the business on a daily basis.

3.3.3 INVENTORY MANAGEMENT

Sacks of feeds are in stored safely to avoid getting

wet during rainy days. But pests, such as farm rats, have

access to it. Rats could easily climb the location of the

food. Feeds which have been eaten by the pests were

immediately disposed by their employees to avoid any

disease contamination. This becomes a difficulty for the

owners as it incurs losses every time the pests march over

their storage room.

3.3.4 ASSET MANAGEMENT

The construction of poultry houses takes time, funds,

and knowledge. In their two years of business, the farm

establishment is still in process, and must be constructed

completely as possible. Predators such as the farm rats and

the famous “bayawak” are roaming within the corners of the

farm house when off guarded. These predators attack at

night when the layers and the owners are asleep. Rats

attack the chicks, destroying their cages and swoop in to

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get a meal. On the other hand, bayawaks or the huge lizards

prey on the adult layers, climbing from the cages and

taking a bite.

The untimely death of some layers during a disease

outbreak is also a difficulty for the owners. Much as they

provide the layers with the proper vitamins, there is still

no further study that will determine the causes of the

disease. During these outbreaks, most of the layers are

infected and only a few survives, by far the most terrible

nightmare for any poultry owner.

Other difficulties involves the weather conditions of

the region. The layers’ weather stamina do not agree with

rainy and summer seasons. The temperature must be balance

to avoid colds and diarrhea.

3.4 SOURCES OF FINANCING

Most of the local banks in Cagayan have loans tailored

for  agricultural business but the owners of JR’s Farm Eggs

prefer to loan in a private supplier for the cost of feeds

because there is no interest regardless of how long the

debt is. One of the owners is a government employee of

DepEd Cagayan and most of the earnings are reserve for

their business’ future transactions.

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The cages of the layers were loaned by the owners to a

close relative with no interest. Most of the accounts

payable of the business comes from the feeds they order

from the private supplier.

To provide financial means required, a company has

choices, credit arrangement with financial institutions or

eventual increasing the own capital. The first choice is

more often used. Increasing the own capital, for the

present owners, would mean having new people as co-owners,

which is not an acceptable option.

3.5. SWOT ANALYSIS

Listed below are the Strengths, Weaknesses, Opportunities

and Threats of JR’s Farm Eggs.

3.5.1 STRENGTHS

1. Ability to sell online.

2. Limited competition in Basi East, Solana area.

3. Owners have healthy relationships with their with

loads of major players in the industry; both suppliers of

poultry feeds and medications and buyers of chickens and

eggs within and outside of Solana, Cagayan.

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4. Poultry farms are able to operate with a moderate

operating expense coupled with moderately high gross

margins.

5. Owners know colleagues who are Veterinarians.

6. People rely on poultry for meat and egg purposes.

7. There will always be a guarantee of one hundred

percent sale everyday because the establishment is

surrounded by numerous “Pancitan” and other “carinderia”.

3.5.2 WEAKNESSES

1. Lack of trained human resource in the field of

poultry farming and livestock disease prevention and

control.

2. Competitors can offer similar products quickly.

3. Owners are highly experienced in the nature of

their business.

4. Low level of control in case of a disease outbreak.

3.5.3 OPPORTUNITIES

1. Technologies such as solar energy will be an

opportunity for the business as there is potential for an

increase in electricity prices by Cagelco I.

2. The increasing per capita consumption of eggs.

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3. The increasing population of Solana, Cagayan and

double income families will be an opportunity for the

business.

4. The no interest rates from private suppliers will

mean lower costs incurred as a result of borrowed money.

5. Government support of the Poultry Industry, knowing

that Cagayan Valley contributes a large percentage of

poultry farming in the country.

6. Affiliate relations with related vendors and

repeating customers.

7. Ability to add more layers and expand the

establishment.

8. Develop a specific brand name that they can use in

conjunction with their farming.

3.5.4 THREATS

1. The threat from changes in customer preferences as

well as the fact that eggs are generic products that

customers can buy from other food stores.

2. The threat from substitutes or alternative protein

rich food.

3. The threat from suppliers – in the case of feed,

there is a threat of rising feed costs.

4. The intensity of rivalry amongst players.

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5. The threat from well-established competitors such

as Magnolia Chicken, Bounty Fresh and Monterey.

6. The threat from rising electricity and water bills.

This is a threat to the project as its operations will be

more costly and thus force the project to pass on the

additional costs to consumers. This is a threat to the

project as it has potential to result in reduced sales and

profits.

7. Death of layers during production.

3.6. FINANCIAL MANAGEMENT DECISIONS

Being excessively organized on the basis of methods,

the poultry sector needs to mix information through

different procedures such as bird rearing, laying and

incubating eggs, and synchronizing for a continuous supply

of feed, medications, and immunizations across different

farms. This is beyond the realm of imagination, by

recording manual.

Jr’s Farm Eggs owners finances rely both on their

salaries and the dividends from their business. Surplus

cash will be intended for the establishment of another

business line, a rabbit farm. The owners have already

started with two pairs and waiting for the right

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opportunity to breed. The researcher agrees with the daily

monitoring of the layers using MS Excel as the software.

That way, owners will able to anticipate the performance of

the layers. It will also detect the daily purchase of eggs

by the customers to avoid confusion.

3.7 RECOMMENDATIONS

Jr’s Farm Eggs must achieve good layers, farm house

and gut health requires operational excellence and

attention to detail. A combination of quality nutrition,

veterinary guidance, and increased consideration of bird

management will help to ensure layers have the best

possible chance to perform at their maximum potential.

Adequate downtime of at least thrice a week with

appropriate cleaning and disinfection measures between

flock placements helps to reduce transmission of disease

between flocks and allows time to prepare for the next

flock.

The researcher endorse the owners to walk the

establishment routinely to also help ensure equipment

remains in working order. This is also a good opportunity

to keep an eye on the layers to see if they are comfortable

and safe from possible predators. On the other hand, the

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researcher does not agree with the owner’s approach on

their payables. Their records of payables are stagnant,

after paying their obligations last week, the owners will

ask for another debt with the same amount, causing their

payables to the suppliers to be steady. The researcher

would advise the owners to pay necessary obligations before

establishing their next business line, the rabbit farm.

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Chapter 4

CONCLUSION AND RECOMMENDATION

4.1 CONCLUSION

Since the country is self dependent in poultry farming

and there equipment’s with less government and initiative

of private enterprise, this industry requires support from

veterinary health, poultry feed, financial sectors and

poultry processing sectors for better growth which directly

and indirectly creates more employment.

The researcher therefore concludes that the success of

establishing a poultry farm such as Jr’s Farm Eggs requires

the necessary experience of the proprietors. It needs a lot

of patience from aspirant businessmen to achieve the

desired profit if they want to pursue a career in poultry

farming. Having adequate suppliers and customers are an

advantage for this business. A resident veterinarian must

be in touch with the owners and frequently visit the layers

to ensure their safety from any diseases.

Profitability defined as profits, excluding family

labour wages, per unit of output does not differ

significantly between small-size and large-size farms,

whether layer or broiler. In other words, profitability per

unit is not significantly affected by scale of operations.

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4.2 RECOMMENDATION

1. The researcher recommends that priorities for

monitoring feed, water, and poultry products and the

intensity of the monitoring efforts be directly done on

a daily basis to ensure layers are safely stored in the

farm house.

2. The researcher recommends that sanitation procedures

must be settled thrice a week, not twice, to guarantee

that the layers and eggs will not be stained with

manure. Jr’s Farm Eggs should periodically assess the

public health risks of chemical residues in poultry

products, using data collected from its residue

monitoring program.

3. The researcher encourages the owners to build more

cages for the layers. There are three layers in each

cage, limiting the chicken’s movements. This is also a

prevention to weather conditions and to avoid

suffocation.

4. The researcher motivates the owners to put some music

surrounding the farm house as a form of relaxation for

the layers. An experiment from a different research

shows that layers produce more eggs when relaxed.

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Chapter 5

DOCUMENTATION

IMAGE 1. INSIDE JR’S FARM EGGS

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IMAGE 2. THE OWNER OF THE BUSINESS AS SEEN HARVESTING EGGS

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IMAGE 3. THE OWNER SORTING THE FARM EGGS WITH ITS

CORRESPONDING WEIGHT

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IMAGE 4. FARM EGGS COLLECTED ON A DAY-TO-DAY SCENARIO

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IMAGE 5. THE OWNER OF THE BUSINESS AND THE RESEARCHER

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IMAGE 6. FARM EGGS ARE SORTED ACCORDING TO THEIR SIZES

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IMAGE 7. AN EGG IN JUMBO SIZE

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IMAGE 8. AN EGG IN PULLET SIZE

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IMAGE 9. AN EGG IN SMALL SIZE

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IMAGE 10. ONE OF THE VITAMINS USED IN MAINTAINING GOOD
HEALTH FOR THE FARM CHICKENS

IMAGE 11. THE OWNER AND A CUSTOMER WHO OWNS A PANCITAN NEAR
THE ESTABLISHMENT

REFERENCES

Abdul, R. and Mohammed, N. (2007). Working Capital

Management on Profitability Case of Pakistani Firms.
International Review of Business Research Papers, 3(1),
279-300.
ACCA(2003), Study pack on “Financial Management and
control paper 2.4.
Brigham EF and MC Ehrhardt (2004). Financial
Management: Theory and Practice (11 th Edition). New York:
South-Western College Publishers.
Burns, R. and Walker, J. (1991): A survey of working
capital policy among small manufacturing firms, The Journal
of small business finance, Vol. 1(1), pp. 61-74

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 St. Paul University Philippines
Tuguegarao City, Cagayan 3500

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Carpenter MD and KH Johnson (1983). The Association
between Working Capital Policy and Operating Risk. The
Financial Review 18(3): 106-106.
Drever M, Armstrong B (2005). ‘Measurement models
explaining the credit management constructs for the small
and medium-sized enterprises (SMEs)’, Southern Cross
University
Gill, A., Biger, N. and Mathur, N. (2010) “The
Relationship between Working Capital Management And
Profitability: Evidence From The United States,” Business
and Economics Journal, 10, pp 1-9
Grablowsky B.J (1976). Mismanagement of Accounts
Receivable by Small Business, Journal of Small Business
Management 14: 23- 28
Grablowsky B.J (1984), Financial Management of
Inventory, Journal of Small Business Management. July: 59-
65.
Harris, A. (2005). Working Capital Management:
Difficult, but Rewarding. Financial Executive, 21(4): 52-
53.
Howorth, C. and Westhead, P.(2003), The focus of
Working Capital Management in UK Small Firms, Management
Accounting Research, 14(2): 94-111.

LETTER TO THE RESEARCH PROFESSOR

October 26, 2020

CHARITO M. GUILLERMO, CPA, DBM

Advance Financial Management Professor
Saint Paul University Philippines
Tuguegarao City, Cagayan

Dear Ma’am:

Warm Christian greetings!

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I am currently conducting a research for the degree Master
of Business Administration, which is titled “WORKING
CAPITAL MANAGEMENT AND PROFITABILITY OF JR’S FARM EGGS IN
SOLANA, CAGAYAN”. The participants of the study will be the
owners of the business, its employees and selective
customers.

In this regard, may I ask permission to float my one time

face-to-face interview with the participants? Rest assured
that proper social distancing protocols have been properly
observed.

Thank you very much for the positive response to this

request.

Very sincerely yours,

CHARLENE MAE S. ZAMBALE

MBA Student

JR’S FARM EGGS

CERTIFICATE
#36 Basi OFCagayan
East, Solana, APPEARANCE
Valley, 3503

CERTIFICATE OF APPEARANCE

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This is to certify that Mr. / Ms. CHARLENE MAE S. ZAMBALE of #3
Mallillin Street Extension, Pallua Road, Pallua Norte, Tuguegarao City
personally appeared in my business establishment on October 25, 2020 for the
purpose of interview and conduct on site business monitoring of my
business egg layers.

This certificate is being issued upon request for whatever school purpose
it may serve.

Issued this 29th day of October, 2020 in Basi East, Solana, Cagayan.

ANTONIO S. ZAMBALE
OWNER

CURRICULUM VITAE
NAME: CHARLENE MAE S. ZAMBALE

DATE OF BIRTH: MAY 03, 1994

PLACE OF BIRTH: URDANETA CITY, PANGASINAN

PARENTS: ATTY. RENATO C. STA. TERESA+

MA FRELYN O. STA TERESA
SPOUSE: P/CAPT. TRISTAN JOHN F. ZAMBALE
HOME ADDRESS: PALLUA NORTE, TUGUEGARAO CITY, CAGAYAN
3500

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EDUCATIONAL BACKGROUND

PRIMARY: PACO CATHOLIC SCHOOL

PACO, MANILA
2001-2006

SECONDARY: PACO CATHOLIC SCHOOL

PACO, MANILA
2006-2010

TERTIARY: COLEGIO DE SAN JUAN DE LETRAN - MANILA

INTRAMUROS, MANILA
2010-2014 (BSBA FINANCIAL MANAGEMENT)
POST GRADUATE: FLORENCIO L. VARGAS COLLEGE
TUGUEGARAO CITY, CAGAYAN
2018 (EARNING UNITS)
CIVIL SERVICE ELIGIBILITY
CAREER SERVICE PROFESSIONAL
PROFESSIONAL REGULATION COMMISSION ELIGIBILITY
LICENSED PROFESSIONAL TEACHER

WORK EXPERIENCE
OPERATIONS ASSOCIATE, DEUTSCHE KNOWLEDGE SERVICES,LTD
JUNE 2014-DECEMBER 2016

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