Examining financial performance of manufacturing companies: an extended DuPont analysis

Abstract This study examines the financial performance of manufacturing companies in the South Wollo Districts of Ethiopia using the extended five-step DuPont framework. The study employed a quantitative research design using balanced panel data from manufacturing firms spanning from 2020 to 2024. A multi-stage sampling technique was employed to choose 49 manufacturing companies. The study used secondary data obtained from the financial statements and annual reports of sampled manufacturing firms and analyzed them through econometrics and descriptive statistics. The descriptive results reveal substantial heterogeneity in ROE across firms, with persistent differences between high- and low-performing companies. The empirical analysis is conducted using a Prais–Winsten and random-effects regression model to address potential autocorrelation. The Prais–Winsten regression served as the principal estimation technique, whereas the random-effects model functioned as a robustness check. The result demonstrates that tax burden, interest burden, and equity multiplier are the significant drivers of ROE, whereas profit margin and asset turnover are insignificant. The finding suggests that effective management of tax and interest burdens is essential for sustaining shareholder returns in manufacturing firms.