Feasibility Study on Small Businesses

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CHAPTER I
THE PROBLEM AND ITS BACKGROUND

INTRODUCTION

Most of the Filipinos are business-minded. Small or big, it doesn’t matter. Their main purpose o to earn profit and make a living. There are three (3) legal forms or business organizations; sole proprietorship, partnership and corporation. Among all these, what is abundant hare in our country are sole proprietors which are almost eighty percent.

Sole proprietorship is a business owned by one person who operates it for his/her own profit. The majority types are found in the while-sale, service, construction industries and the retail. This retail is popularly known as the sari-sari stores. Typically, proprietors raise their capital from personal resources or by borrowing and they are solely responsible for all their business decisions.

On the other hand, we also have partnerships which consist of two or more owners doing business together for profit. The most common types are finance, insurance, real estate firms, public accounting and stock brokerage. The difference of partnership to sole proprietorship is that when it comes to raising funds, the former is more capable of paying their liabilities.

Yet we still have the third type of business which is the corporation. Corporation is an artificial being created by law. It is the largest portion of corporate business receipts and net profit. They are only small in number but when it comes to profit, they can earn a lot. Although corporations are involved in all types of business manufacturing corporations are the largest. Then when it comes to financing their business, they have better access because they guarantee their creditors sure payment.

Metro Manila is the center of all business transactions, local and international. It is in this city where almost all kinds of businesses and business men are innovating. Industrial, textile, manufacturing, information and technology-related companies do not only exist but grows in their own ways.

BACKGROUND OF THE STUDY

Business and firms anywhere have their own purpose in operating. Most of them will aim of maximizing their wealth and expanding their industry to further meet the demand of the market.
These objectives are not easy and some of their few ways of realizing this is through issuance of stocks (for corporation), selling some of their non-profitable assets, investing their idle funds or through borrowing from any financial institution that will meet their standards and will give them the capital that they will need.

Credit is the most usual way of obtaining the capital that most of our businesses do. The Researchers have been taught of becoming a good debtors and creditor as well. Yet we become conscious of the effects of not becoming one. What will happen if the terms and conditions of a loan or credit are not complied accordingly?

In giving credits, the creditors consider the debtor’s personal character as a measure of its capacity in paying debts. The borrower’s potential strength is also being considered, together with his collateral or pledge in exchange that lessens the risk of not being paid. Both parties have their own conditions and demands that must be unified to arrive in an agreement to finish the fund extension to somebody who needs it urgently.

Yet moral hazard is not prevented and whatever relationship they built at the start can be broken. What the researchers want to do is to seriously alarm business firms their consequences once they default from their loan or credit promise. By knowing these, they will handle the situation properly and considerately.

THEORETICAL FRAMEWORK

Credit management starts from a good financial planning. It is said that financial planning is very essential because it provides road maps for guiding, coordinating and controlling the firms/business’ actions towards its objectives. There are two key aspects, cash planning and profit planning. Cash planning involves preparation of firms’ cash budget...
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