Working Capital Management and Profitability On JRS Farm Eggs in Solana Cagayan

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
1
_______________________
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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4. Asset 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
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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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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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
Graduate School

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St.

Paul University Philippines

WORKING CAPITAL MANAGEMENT AND PROFITABILITY

OF JR’S FARM EGGS IN SOLANA CAGAYAN

A Research Proposal Presented

to the Faculty of the Graduate School

St. Paul University Philippines

Tuguegarao City, Cagayan

Of the Requirements for the Degree

MASTER OF BUSINESS ADMINISTRATION

DR. CHARITO GUILLERMO

SECOND SEMESTER 2020-2021

THE PROBLEM AND REVIEW OF RELATED LITERATURE

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

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

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

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