Abstract:
This paper is to assess the determinant factors of micro and small enterprises’ financial
performance in Ambo town. Mixed research approach was applied based on the sample of
population 172 MSEs operating in this town. The sample sizes were selected from MSEs such
as construction, service, manufacturing, Agriculture and trade sector. The data were collected
from offices for the five-year period (2016/2017-2020/2021). Then the financial performances of
sectors were measured by using three parameters which are return on sales (ROS), return on
assets (ROA), and return on equity (ROE). Data were analyzed by linear regression model and
simple correlation. The result of the study indicated that working capital, firm size, liquidity, fixed
asset investment, sales revenue growth and access to credit have significant effect on financial
performance. Out of this variables sales revenue growth and access to credit have negatively affected all
financial performance variables while FAI has positive effect on all dependent variables and firm size
have positive effect only on ROS. Investigating more many factors that can hinder the performance
of Micro and small enterprises is crucial for the best future improvement of the performance of
the enterprises
