Chapter 1

THE PROBLEMS AND ITS BACKGROUND

Introduction

Statement of the Problems

This study aimed to obtain information on the “Effects of Selected Variables on

the Income of Micro-Scale Businesses in Camiling, Tarlac.” Specifically, this research

seeks to answer the following questions:

1. What is the demographic profile of the respondents in terms of:

1.1 age;

1.2 sex;

1.3 highest educational attainment;

1.4 type of business; and

1.5 years of business operation?

2. How much do the following selected variables impact micro-scale businesses?

2.1 employee motivation;

2.3 strategic management;

2.4 access to finance;

2.5 financial literacy;

2.6 marketing strategies;

2.7 entrepreneurial characteristics;

2.8 firm size;

2.9 technology;
 3.0 business location; and

3.1 supply challenges;

3. How do these selected variables impact the respondent's business as a whole?

4. What strategies can the respondents recommend to improve the financial

performance of businesses?

Objectives of the Study

When deciding on the goals of the study, it is necessary to define its purpose and

objectives. This study seeks:

Significance of the Study

The study was made to know the operational management of coffee shops on

market competition in Camiling, Tarlac. The findings of this study would greatly

contribute to the following:

To the Micro-Scale Business Owners and Vendors. It would help them better

understand the concept of cash flows by providing them ideas and strategies that would

help in managing their enterprise, in spite of knowing that there are many factors that

could affect their business, specifically, their income.

To the Consumers. This study would benefit consumers in a way that they would

understand, as consumers, how their buying behaviors affect the income of various

businesses. They will gain more ideas regarding the factors that affect the goods and

services they buy.

To the Entrepreneurs. As this study is related to businesses, the findings would

help entrepreneurs understand how different variables can affect their business's income.
 To the Future Researchers. This study would serve as their reference in

accomplishing their research that is also related to the cash flows or income of

businesses. It can help them to understand and gain more knowledge about this topic

which they may use for their study.

Definition of Terms

For common understanding, the following terms were conceptually and

operationally defined to provide clearer understanding of this study.

Age. It refers to the length of time that a person has lived or that a thing has

existed. In this study, age is included in the demographic profile of the selections, which

would help determine how old the vendors are and what might be their effects on one’s

business income.

Business Operation. It refers to the daily actions that businesses participate in to

boost the enterprise's value and profit. In this study, business operation is how a business

runs daily.

Demographic Profile. It refers to specific features within a given population,

including age, income level, education, and geographic region. In this study, a

demographic profile is used to determine the basic information or the identity of the

respondents.

Employee motivation.

Highest Educational Attainment. It refers to the highest grade or year completed

in school, college, or university. In this study, the highest educational attainment falls

under the demographic profile of the respondents; it refers to the highest education they

have attained.
 Sex. It refers to the physical differences between people who are male, female, or

intersex, which are assigned at birth based on physiological characteristics. In this study,

sex is used to determine the identity of the respondents, whether they are male or female,

girl or boy.

Years of Business Operation. It refers to the length of time that a business has

been operating. In this study, years of business operation refers to how long the selection

has been in operation, which will be used to differentiate them.

 Chapter 2

REVIEW OF RELATED LITERATURE AND STUDIES

Reading related literature and studies has its beneficial goals. It provides new ideas

that refresh and enhance the knowledge of the researchers and readers of this chapter.

The readings, articles, and studies that are relevant to this research project are presented

in this chapter.

Related Literature

According to Lauckner and Tsosie (2022), the major differences between a micro

business and a small enterprise are issues of size and scale. By the definition of the Small

Business Association, micro business is any form of small firm having less than ten

employees, while small enterprises can have as many as 500 employees. Examples of

micro-enterprises include self-employed persons, independent contractors, freelancers,

and many firm owners who operate out of one location. For these micro-organizations,

marketing and financing might be much more of a challenge, even though they usually

have closer relationships with clients and are typically less capital-intensive to operate.

Small business bank loans can be out of the question for micro business owners who need

start-up or operating capital. Even the smallest businesses, including those with less good
credit, less debt, or immediate cash demands, can use working capital from the different

online small-business lenders. Many of the micro businesses are indeed independently

privately operated single-person businesses, though they can employ as many as ten

people in total, including the owner. Therefore, an owner might become responsible for

several hats: operations, marketing, sales, taxes, etc.

The following section briefly introduces conceptual frameworks and models of

locational determinants, providing a supporting typology of the frameworks and theory.

As noted in the article by Carpenter et al. (2021), because the current focus is empirical

methods and data problems relevant to business location research, some of the analytical

frameworks can instruct those methods. The paper proceeds next to a discussion of the

evolution of empirical methods in the context of the related data problems. We finally

conclude with a description of underexplored data sources that could fuel further research

in locational determinant research, such as the development of spatial count information

models, better size measurement of industries, and understudied frameworks. We finally

sum up the description of underexplored sources, which could feed deeper research on

location determinants, such as the development of spatial counting models, a better

measurement of the size of industries, and poorly studied executives.

Despite all the various barriers that exist for small business owners trying to grow

their companies, Beattie, et al. (2024) argue it is a great time to be a small business owner

in the United States. As many as 1.4 million new small businesses were created in the

United States from March 2021 through March 2022. Hiring dedicated staff members is

one of the major problems that entrepreneurs who are starting a small business face. One

of the significant issues most small businesses have to address is that of finance. It may
mean disaster for the firm if only one customer does not pay. Last but not least, growth at

the cost of quality is an issue for most companies. There could be situations where

downsizing might demand compromise on quality. For even the seasoned entrepreneur, a

small company could be a tough task to start; the statistics of the high percentage of firms

that fail within one year are a pointer to the same fact. There are some mistakes you can

avoid in the near term to increase your chances of success during the long run. One of the

most common mistakes made by small business owners is not starting with a

comprehensive business plan. It should include an overview of all marketing and sales

activities, investment details, financial forecasts, market research regarding local

competitors and demand for the products, business profit model, and operational details.

The major problems faced by an entrepreneur who is starting a small business are

centered on the issues of hiring dedicated staff members. Not starting with an overall

business plan is another very common mistake that most small business owners commit.

It should contain an overview of all marketing and sales activities, investment details,

financial forecasts, market research regarding the local competitors and demand for the

products, business profit model and operational details.

According to Louman, et al. (2022), such a framework requires a good multi-

stakeholder landscape platform or partnership in its execution. The best that CSOs,

businesses, MSMEs, municipal authorities, and other relevant levels of government must

do is align towards finding a strategic vision for the environment. This should be a vision

that opens up opportunities for public and private investment and the enabling

investments needed to attract investors. Such stakeholders should, therefore, have access

to this sort of finance through relevant instruments created by a specially created entity or
independent body with financial expertise. The instruments should appeal to a variety of

relevant investors and lenders. This shall include an effective mix of grants and

financing, plus other risk mitigation measures like guarantees. The inclusiveness of

landscape finance lies in its higher levels of governance above the landscape, along with

the value chain and the landscape authority. It has involved all the agreements reached

between the regional, national, and global parties, extending to the development and

execution of such agreements. For example, institutions that are transparent to the public,

which are well valued and have developed financial systems, can contribute to reducing

the barriers that small enterprises face in their effort to access finance. Upgrades to this

kind of financial infrastructure could include mechanisms that allow for mobile

payments, such as strengthening creditor defenses or creating open registries for

moveable assets, which have allowed the use of trees as collateral in some countries. One

of the most pervasive conditions for investments and the promotion of sustainable land

use is secure land tenure. Although local-level mechanisms can be developed involving

customary governance and making good on a lack of legal tenure, access to money

remains out of reach for many without capacity to meet national standards. Setting up the

multi-stakeholder platform institutionalizing a common vision for environmental

sustainability will call for CSO-business-government collaboration, just like what

implementation of sustainable land uses will require. An investment instrument that

includes grants and loans would need to be designed, along with the financial institution

to work with stakeholders. Stronger governance at regional, national, and global levels

would be required if more inclusive landscape finance is to become possible.

 According to Charatsari, et al. (2022), there is a brief definition of innovation and

its different types. Business owners should unpack in more detail the exciting prospect of

responsible technological development, raising some challenging issues to be considered

in order to embrace such expected changes effectively. Outlining thereafter the associated

benefits and risks of poly-innovation. We then turn to a discussion of technical micro-

innovation: how it can help build resilience among small-scale farmers and how it might

be fostered. We close with a summary of the main points in our paper. It then explores

the exciting potential of responsible technological development in agrifood systems,

bringing out challenging issues for effective adoption. It outlines the benefits and risks of

poly-innovation, after which it proceeds to discuss technical micro-innovation with a

focus on building resilience amongst small-scale farmers and how to promote it.

According to UP ISSI-Diliman (2020), the initiative continues to be difficult for

employees of small businesses due to the lack of technical experts and resources that can

be used to provide the right methods and techniques to guarantee the entrepreneurial

competencies that Filipinos require in order to successfully launch and operate the

business in our economy, along with all of the risks. The majority of government

initiatives fail because they lack strategic planning for job prioritization and even the

monetary allocations that are accessible. The comprehensive programs are a match for the

abilities of Filipino entrepreneurs. With the demands of the Philippines in business, it is

necessary to equip their marginalized groups that need to advance in their lives. To put

their recommended policies into practice, the problem is providing suitable training

programs that will improve each person's skills and competencies. That will also solve

their difficulties in business due to a mismatch between expectations and entrepreneurial

skills, which frequently causes employees to give up their cooperation to work in

business.

Business owners have to be innovative in the concepts and products they will

operate locally to create job opportunities with preference for locals by driving new job

growth in the local town or city. They should also have flexibility, which the new

business can start, think of innovative ideas for the business, and make the employees

more focused on their jobs in the business that will be effective for them. It had much to

do with the global health crisis, which had a great impact on our economy and,

apparently, has led to a slowdown in the operation of the tourism, airline, hospitality, and

retail industries. Supply chains are a trade that has disrupted some businesses. Over three

million Filipino employees lose their jobs due to the relentless plague of the pandemic

crisis, according to the Department of Labor and Employment (2021).

According to the Philippine Commission on Women (no date), COVID-19 hits

economies and women around the world. Luzon enforced increased community

quarantine and confinement measures from April 28 to May 16, 2020. An evaluation of

the socioeconomic impacts of COVID-19 and containment measures on Philippine firms

was carried out by the United Nations Industrial Development Organization (UNIDO)

and its partners. It involved 235 enterprises; most of them were microenterprises, and half

were producing finished products for the domestic market. Most were women-owned and

relatively young ventures. The assessment documented that most businesses cannot

coordinate their supply and value chains, leading to a lack of explicit business continuity

plans, shortage of raw materials, and problems with distribution, shipping, and logistics

—more acute in the case of microenterprises and domestic-market-oriented businesses.

Confirming the previously indicated concerns, the Project Management Office polled

local area coordinators to determine the immediate effects of COVID-19 on women

micro entrepreneurs (WMEs) in the Philippines Project, GREAT Women Project 2.

Examples of variables here are the pandemic, which is COVID-19, that affected the

economy, and the women-owned businesses around the world, where most of the

businesses affected were microenterprises.

According to Alburo & Associates Law Offices (2019), Barangay Micro Business

Enterprises (BMBEs) refers to any business entity or enterprise that produces, processes,

or manufactures goods or commodities, including agro-processing, trading, and services,

with total assets that do not exceed three million pesos (P3,000,000.00), including those

resulting from loans but excluding the land on which the specific business entity has its

office, plant, and equipment. The BMBEs program provides small-scale entrepreneurs

with the chance to start their businesses with minimal financial resources. BMBEs are not

required to strictly abide by the Minimum Wage Law. Since they are tiny enterprises, the

law is more forgiving; hence, they are allowed to establish a wage below what is required

by law. However, they still need to get the same benefits as normal workers, such as SSS

and PhilHealth. This financial support is a positive effect from the BMBEs and is a big

help for the micro-scale business income of the micro-businesses in the barangays since

the BMBEs are not required to strictly abide by the minimum wage law.

According to Rapisura (2019), 21.9 million Filipinos lived in poverty in 2015.

The incidence of poverty was greater among farmers, fishermen, children, unpaid family

workers, self-employed individuals, and women from low-income households than

among the general population. Women typically have less control over family assets and
decision-making authority on the use of income, which further reduces their ability to

break the cycle of poverty. In 2004, the government reported the following challenges

microenterprises face: lack of managerial skills of entrepreneurs and inadequate technical

skills of workers; limited access to technology and lack of funds for research and

development; low productivity and low product quality; limited access to financing;

limited access to information; and an overall business climate that is hampered by the

high cost of labor, raw materials, inadequate services, and infrastructure. These variables

can affect the businesses or companies. income of small businesses' income as well as

that of big

Related Studies

A. Foreign

The study of Suwandewi, et al. (2024) entitled “The Influence of Go Food Usage,

Business Duration, and Education Level on the Income of Culinary Businesses in

Denpasar City,” had demonstrated that long-term issues such as economic growth,

poverty, and unemployment rate are long-term issues faced by every country. However,

through the use of proper approaches, the nation might aid the issues by promoting home

businesses which are often characterized or categorized as a micro-enterprise, as they can

absorb a lot of labor. The study showed how variables such as duration of business and

educational attainment impact the income level of small enterprises, particularly the

culinary businesses in Denpasar City. The rapid development of these businesses leaves a

positive effect on the economy. In the study, the length of time a business has been

established relates to the experience gained by the owner. Longer-established businesses

likely have more experience, making them better prepared to address challenges, which

positively impacts business growth and income. Quality human resources are a key factor

in business advancement. Business owners and employees with a good educational

background are better able to create quality products and innovate regularly, impacting

business existence and income. The study highlighted the importance of MSMEs in

addressing economic issues.

It is shown in the findings of the study conducted by Suminah, et al. (2022)

entitled “Determinants of Micro, Small, and Medium-Scale Enterprise Performers’

Income During the COVID-19 Pandemic Era" that the income of businesses, ranging

from micro, small, to medium-scale enterprises (MSMEs), is significantly impacted by a

number of variables, including age, workforce size, business longevity, empowerment,

human capital, type of business, and production technology. These MSMEs are not

limited to one type of business; rather, a variety of business types were taken into

consideration. The majority of the participants belong to the micro-scaled business

category, and the majority of them have zero to sixteen workers each, indicating that

micro-firms have a small workforce. It stated that MSMEs with few and many employees

show different incomes. However, it was also demonstrated that MSME income can be

increased by adding employees. When it comes to maturity, most of the MSME workers

are of middle age. The older a person ages, the more his emotions settle and the more

diligent he can be in managing his business. Moreover, in this study, production

technology is divided into three parts, namely manual, semi-manual, and modern

technology. It has been concluded that the application of appropriate technology enables

enterprises to produce a production technology package that can increase production

capacity and income. When it comes to the capital sources of MSMEs, owner’s equity

has been the highest source of capital, while some are from loans, which have

demonstrated that it might increase the financing burden and complicate one’s business.

Business length, on the other hand, was depicted as having an impact on the business. It

was also shown in the study that businesses are classified based on their type.

Similar to the research study conducted by Salmah, et al. entitled “The Effect of

Business Capital, Length of Business, Working Hours and Business Location on Micro-

scale Business Income in Udayana Park, Mataram City”, business capital, duration of

business, business location, and the variable working hours has also placed a significant

impact on income of micro-scale enterprises. An essential component of business

continuity is business capital. Prior studies have demonstrated that capital significantly

and favorably affects Micro, Small, and Medium-Scale Enterprise (MSME) income,

because it allows businesses to spend and utilize it effectively in expanding their

business. The duration of business and working hours can also have a big impact on the

revenue of MSME. Experienced entrepreneurs tend to be more successful in managing

and developing their company. The money earned increases with the length of business

ownership and the number of hours worked. The location of the business, on the other

hand, is a significant factor in determining revenue. A strategic location can increase

MSME revenue because it affects the number of visits and customer accessibility.

Considering the mentioned variables will generally help businesses to optimize their

income, which this study also aims to explore as they both tackle different factors that

affects income.
 Similarly, the study by Setyaningsih et al. (2019), entitled “The Analysis of

Factors Affecting the Income Level of Street Vendors,” found that there are several

factors affecting the income level of street vendors, a micro-scale business. These factors

include initial capital, the number of workers, and the length of the business. The

mentioned variables certainly affect the income of a business because they are considered

factors of production or the inputs that are needed for creating goods or services. As

stated, business longevity impacts income levels as it determines the survivability of a

business in the market. The result of the study indicated that there is a positive

relationship between the length of business and the net income level the vendors gain.

One’s business’ capital is also said to have an impact on the business's cash flow. Higher

initial capital allows business owners to produce more goods, which is equivalent to

higher sales. The size of the workforce has a significant contribution to a business.

Conversely, the study has stated that the variables of gender and education level were not

considered determinants of the difference in the income level of their respondents. It is

because skill and expertise are the ones that distinguish levels of income.

According to a foreign research study conducted by Perera (2021), entrepreneurial

characteristics has a significant on a business’ overall performance. The researcher

The study by Uche Peter Nsoke et al. (2021), entitled “Accounting Practices and

Their Effects on the Growth of Micro and Small Scale Enterprises: Analysis from

Nigeria,” looked at the impact of accounting strategies for expanding micro and small

businesses (MSEs) within Nigeria. The importance of small and microbusinesses (MSEs)

in any economy cannot be emphasized enough. Among others, in Nigeria, micro, small,

and medium-sized enterprises (MSEs) have important responsibilities in the creation of

jobs and income. Additionally, it causes the industrialization process to occur, sustainable

economic expansion and development, promotes the creation of jobs and

entrepreneurship, decreases poverty, and contributes to the GDP of the nation, which

brings in creativity and the Universal Journal of Finance and Accounting entrepreneurial

abilities. Small companies might not have as many resources as bigger businesses, yet

survival is equally important and essential to the growth of the economy. This

emphasizes the importance of having proper practices in business and in the business

economy.

The study entitled ”Impact of Public Intervention on Micro and Small Enterprise

Performance in Ethiopia: A Firm-Level Empirical Evidence” by Yonis et al. (2019),

improving enterprise performance, often raises questions about how well government

support programs for small businesses will work. This work seeks to provide a

comprehensive assessment of the effects of support programs for micro, small, and

entrepreneurial enterprises (MSEs) on important core, intermediate, and final outcomes.

According to the report, MSEs were inspired by the public intervention to adopt creative

business strategies and enhance their procedures for developing human resources.

Additionally, the intervention was successful in increasing job opportunities in cities. On

the other hand, the analysis demonstrates that recipients of assistance do not have a

benefit in terms of investment intensity. The beneficiaries experienced inefficiencies

because of the reduced degree of investment intensity on fixed capital. Furthermore, the

receivers' net assets did not change over time as a result of the intervention. This study

suggests that support programs should be flexible and focused on developing high-

growth, creative.
 Based on the study of Fauzi1, M. et al. (2023) entitled “The Strategy of Micro

Waqf Banks for Job Creation on Micro-Scale Enterprises in Indonesia” Indonesia, a

Muslim-majority country, is focusing on establishing and supervising micro waqf banks

to channel Islamic social finance into micro business financing. This research aims to

determine the job creation strategy of these banks in Banten Province, Indonesia. The

study uses qualitative and quantitative methods, with data analysis using the SWOT

technique. The findings suggest that increasing new customers for micro waqf banks

leads to increased business financing, creating potential for new businesses and additional

workers in the informal sector. This highlighted the importance of using SWOT technique

to determine the possible actions that can develop microfinance.

B. Local

As concluded by Orpia (2020) in her study entitled “Work Performance Influence

on Employee Motivation and Business Productivity in the Accommodation Industry of

Ilocos Norte, Philippines”, a company's ability to achieve its objectives, and ultimately its

overall success, is directly tied to the quality of service it delivers. To ensure high-quality

service delivery, there is a crucial need for effective motivation strategies that foster

employee satisfaction and commitment across all levels, departments, and sections of the

accommodation industry. This study underscores the influence of internal factors, such as

employee motivation, on the financial performance of micro-scale businesses,

particularly those operating in service-oriented sectors. It suggests that investing in

employee motivation, through strategies like providing growth opportunities, recognizing

achievements, and creating a positive work environment, can significantly boost service

quality, increase customer satisfaction, and ultimately drive profitability for micro-scale
businesses. By prioritizing and addressing employee motivation, organizations can

empower their workforce to reach their full potential, which leads into enhanced

customer satisfaction and financial success.

Additionally, Chungyas and Trinidad (2022) in their study entitled “Strategic

Management Practices and Business Performance of Cooperatives in Ifugao, Philippines:

Basis for Strategic Planning Model” delved into the critical role of strategic management

practices in driving the financial and operational performance of cooperatives. It

highlights that the adoption of strategic management principles, including the clear

articulation of vision, mission, and goals, is not merely a suggestion but a necessity for

the success of all organizations. This study highlighted the impact of strategic

management as a key variable influencing the financial performance of micro-scale

businesses. It underscores the need for organizations to proactively address competition

by implementing strategic management practices across different levels to be

competitive. By implementing strategies, businesses can enhance their financial stability

and improve efficiency for long-term success.

Moving on, the study of Angeles (2022) entitled “A Qualitative Study on the

Effect of Access to Finance on the Growth Motivation of Micro and Small Enterprise

Owners in the Philippines” has explored the relationship between access to finance and

the growth of micro and small enterprises (MSEs). While recognizing the significant

contribution of MSEs to economic development, the study highlights a concerning trend

where many MSEs remain stagnant despite their widespread presence. Access to finance

emerges as a crucial factor influencing the growth aspirations of business owners.

However, the study challenges the common assumption that external finance always fuels
growth, suggesting that it can sometimes hinder the expansion and modernization of

MSEs. This shows that many factors impact the performance of micro-scale businesses. It

reveals that simply providing financial resources is not enough to guarantee the success

of small businesses.

Furthermore, Bancoro's (2023) study entitled “Financial Literacy of MSME

Business Owners in the Municipality of San Jose, Negros Oriental, Philippines: A Basis

for a State University’s Extension Program” sheds light on the critical role of financial

literacy in the success of micro and small enterprises (MSEs). Recognizing that financial

literacy is crucial alongside other business skills, the study investigates the financial

literacy levels of MSME owners and their impact on business performance. The study

found that while MSME owners demonstrate a high level of understanding in areas such

as debt management, utilizing savings accounts, and managing expenses, they exhibit

areas for improvement in overall personal financial management, long-term planning, and

managing emergency situations and risk. This conforms to the study with the emphasis of

the significant impact of financial literacy as a key variable influencing the profitability

of micro-scale businesses. This study highlighted the link between financial literacy and

business success for MSMEs. By demonstrating a positive correlation between enhanced

financial literacy and improved business performance, the study underscored the need to

empower MSME owners with the necessary financial knowledge and skills. This includes

not only strengthening their understanding of business financial management but also

promoting personal financial literacy, recognizing that both contribute significantly to

overall business success.

 Delgado & Moreno's (2021) study entitled "The Effects of the COVID-19

Pandemic on Small and Medium Enterprises" examined the impact of the COVID-19

pandemic on Small and Medium Enterprises (SMEs) in Candelaria, Quezon, focusing on

key business drivers, human resources, and core business functions like operations,

finance, and marketing. The study found that the pandemic significantly impacted

product and service offerings, with many businesses experiencing disruptions. While

some businesses reported minimal human resources impacts, they chose to reduce hiring

and working hours. The study also highlighted the significant impact of health protective

measures on major business functions, with most owners trying different strategies of

selling. Despite the challenges, businesses showed flexibility by finding ways to adapt

and continue operating. However, the study also revealed a shift towards anticipating

losses rather than profits, with some businesses temporarily closing due to concerns about

significant losses. This emphasized the impact of external factors on the financial

performance of micro-scale businesses. It highlighted the profound impact of a global

pandemic on business operations, demonstrating the need to consider these external

variables when analyzing the financial performance of micro-scale businesses.

The study by Pagaddut (2021) entitled "The Financial Factors Affecting the

Financial Performance of Philippine MSMEs" highlighted the critical role of Micro,

Small, and Medium Enterprises (MSMEs) in driving social and economic progress.

However, the study emphasized that these businesses face significant challenges,

particularly in accessing and managing financial resources. It sought to understand the

specific financial factors impacting the performance of Philippine MSMEs by analyzing

their audited financial statements. The study identified key findings: a significant impact
of debt ratio, asset turnover, and gross profit margin on return on assets; the identification

of two distinct factor structures ("sustainability" ratios and "efficacy" ratios); and the

categorization of financial ratios into two cohesive clusters ("good" and "poor").

Pagaddut's study recommends that MSMEs should focus on self-sufficiency, efficient

cost management, and optimal resource allocation to enhance financial performance. This

emphasized several key financial variables that have a significant impact on the

profitability of micro-scale businesses. It indicated the importance of factors such as debt

management, asset utilization, and cost control, suggesting that improving financial

literacy and maintaining financial stability within businesses are crucial for achieving

sustainable growth and increasing profitability.

The study by Rosario (2023), entitled "Risk Tolerance of Small-to-Medium

Enterprise Owners and Operators Towards Capital Markets: Evidence from the

Philippines," underscored the importance of risk tolerance in the decision-making

processes of SME owners and operators regarding capital markets. It revealed that SME

owners in Mountain Province have limited knowledge of capital market investments,

which significantly affects their business income and overall financial health. The study

also explores the connection between financial risk tolerance, liquidity management, and

effective investment strategies, suggesting that SME operators with a better

understanding of capital markets are more likely to make informed decisions that boost

their business profitability. Furthermore, the study emphasized how factors such as

income, expenses, liquid cash, and insurance coverage impact their ability to engage in

profitable investments. By improving financial literacy and understanding of capital

market dynamics, decision-making can be enhanced, ultimately benefiting the income of

micro-scale businesses.

In the study of Capiña (2021) entitled “Impact of Management Practices on Micro

and Small Enterprises (MSEs) Performance in Marinduque, Philippines,” the crucial role

of MSEs in rural communities is highlighted. It was said to provide income opportunities

and employment. However, it recognizes that many MSEs in the Philippines lag behind

their ASEAN counterparts, necessitating a closer examination of management practices

and their impact on business performance. The study analyzed the influence of

management practices in key areas like marketing, production, finance, and human

resources on MSE performance, specifically examining their impact on sales, production,

and income. The study identified several key challenges faced by MSEs in Marinduque.

Marketing activities are hindered by price competitiveness due to the business’ location

and transportation costs. Production is affected by limited working capital and

distribution challenges, hampering profitability. Financial management, particularly in

cooperatives and associations, struggles with record-keeping, accountability, and trust

issues. Human resource management often lacks focus on performance evaluation and

training, highlighting the need for greater attention in this area. This emphasized the

importance of effective management practices in achieving financial success for MSEs. It

highlighted the influence of these variables on the income of micro-scale businesses.

The study by Gonzalvo & Avila (2019) entitled "Level of Financial Literacy of

Micro-Business Owners in the Municipality of Ragay, Camarines Sur, Philippines"

explored the financial literacy, attitude, and behavior of micro business owners, focusing

on their understanding of basic financial concepts, record-keeping, savings, financing,

and budgeting. The study found that while micro business owners show a moderate level

of financial attitude and behavior, their financial literacy is generally lower, particularly

in areas like record-keeping, savings, and financing. The study also highlighted a

negative relationship between the age of the business and the financial literacy of the

owner, indicating that as businesses mature, the level of financial literacy may decline.

This underscored the crucial role of financial literacy in driving business success. The

findings suggest a connection between financial literacy and business performance, as

indicated by the positive association between higher financial literacy and higher profits.

A strong understanding of financial concepts empowers business owners to make

informed decisions that lead to more strategic and effective business practices, ultimately

contributing to greater profitability.

Moreover, a research study conducted by Colipano (2022) entitled "Business

Performance of Micro-enterprises in Northern Mindanao, Philippines: A Multinomial

Logistic Regression Analysis" has delved into the factors influencing the business

performance of micro-enterprises in Northern Mindanao, examining their profile,

marketing practices, entrepreneurial orientation, access to finance, and overall business

performance. The study found that business age, marketing practices, entrepreneurial

orientation, and access to finance significantly influence the business performance of

micro-enterprises in the region. These elements were found to have significant impacts

across different industry sectors, with nuances in how each factor played a role. In the

merchandising sector, marketing practices, the age of the business, and access to finance

were critical for performance, indicating the importance of market engagement and

financial resources in driving success. In contrast, the service sector's performance was
more influenced by entrepreneurial orientation, business age, and access to finance,

highlighting the role of innovative and proactive business strategies alongside financial

support. This study, while not directly examining income impact, offers valuable insights

into the distinctive characteristics and practices of micro-enterprises in the region. It

emphasized the significance of these factors in attaining overall business success.

Furthermore, it contributes to a deeper understanding of the factors that influence the

financial health and profitability of micro-enterprises.

Conceptual Framework
Chapter 3

METHODOLOGY

This chapter shows how the researchers conducted the study and how they

gathered information. It presents the instruments for gathering data, the scope and

delimitation were also indicated in the chapter. Specifically, it also shows the methods

and procedures for conducting the study.