Bank Lending Constraints and its effects to the Profitability of SMEs in Davao

City

According to Motta (2018) SMEs who successfully applied for bank loans have
higher labor productivity than those who got rejected. Furthermore, SME’s who
depend more on their internal funds have more problems with access to finance than
those who depend more on bank financing. (Mahmud & Akin, 2019). High information
asymmetry between SMEs and banks is the main reason for the inaccessibility to
bank loans, which also leads to other financial constraints.(Wangmo, 2015).
According to Huan, Xiao, and Saeed(2019), managers should try to keep the trade
level as close to the optimal point as possible to avoid the case that their profitability
reduces when they move away from this point. Moreover, their study also finds that
the optimal trade credit is also sensitive to the financial constraints of SMEs.

Strategic Cash Conversion Cycle Management and Financial Liquidity of

Manufacturers in Talomo District, Davao City
A strategic cash conversion cycle management can be a good way of assessing the
financial liquidity of a manufacturing firm. As stated by Hill and Washam (2018), the
CCC is the period of time where the assets are utilized for the operation of a firm’s
working capital by taking the accounts of inventory turnover period, accounts
receivable turnover period, and accounts payable turnover period. They also
mentioned that a shorter cash conversion cycle increases the firm’s operating cash
flow, and will result to an increased firm’s liquidity.

Impact of Working Capital Management on the Profitability of SME in Davao

City

It is generally accepted the important role by small and medium-sized

firms(SMEs) in the development of the world economy(Audretsch,2002;Ellis &
Tailor,2011).Working Capital Management (WCM) in SMEs is essential to the life of
the business. A steady flow of cash is essential to maintain a business, and sufficient
working capital will maximize profitability(Tran,Abbott,&Chee,2017).The practice of
more aggressive working capital management policies increase firms’
profitability.Moreover, the importance of a good practice in working capital
management is stressed by the evidence suggesting the existence of an optimal
level for the working capital components in the study made by Pais and Paulo(2015).
Motta, V. (2018). Lack of access to external finance and SME labor productivity:
Does project quality matter? Small Business Economics, , 1-16.
doi:http://dx.doi.org/10.1007/s11187-018-0082-9

Mahmud, S. F., & Akin, T. (2019). SMEs' access to finance and choice of capital
structure in turkey. Ege Akademik Bakis, 19(2), 277-291.
doi:http://dx.doi.org/10.21121/eab.521579

Wangmo, C. (2015). SMALL MEDIUM ENTERPRISE (SME) BANK FINANCING

CONSTRAINTS IN DEVELOPING COUNTRIES: A CASE STUDY OF BHUTAN.
International Journal of Arts & Sciences, 8(5), 569-590. Retrieved from
https://search.proquest.com/docview/1764690575?accountid=31259

Huan, C. H., Xiao, Q., & Saeed, A. (2019). Trade credit, firm profitability, and
financial constraints. International Journal of Managerial Finance, 15(5), 744-770.
doi:http://dx.doi.org/10.1108/IJMF-09-2018-0258