Financial Performance Analysis and Its' Determinants: Evidence from Selected Manufacturing Companies in Dire Dawa"

Financial performance analysis is the process of selection, evaluation, and interpretation of financial data, along with other pertinent information, to assist in investment and other financial decisions. This study aimed at analyzing the financial performance of selected manufacturing firms in Dire Dawa city over a period of five years using ratio analysis and regression model analysis. The study employed secondary panel data collected from audited financial statements of seven selected companies for the last five years (2016-2020). To judge the specific performance of the company, the effects of each financial ratio on overall performance were determined using regression model analysis. The ratio analysis result of the study showed that most of companies under study have a good liquidity position of current ratio. The solvency of those manufacturing companies was also good as more than 50 percent of their total assets were financed through equity. The model result of regression analysis shows that variables such as revenue growth (RG), total asset utilization (TAU), liquidity (LIQ), inflation (INF), and gross domestic products (GDP) have a statistically significant and positive effect on firm’s financial performance measured by return on assets (ROA). On the other hand, the result verified that revenue growth (RG), total asset utilization (TAU), and firm size have a statistically significant and positive effect on firms’ performance measured by return on equity (ROE). Therefore, companies are recommended to improve those variables through promotion and increasing inventory convertibility in improving the financial performance of manufacturing companies in Dire Dawa.