Factors Determining Financial Performance Of Micro And Small Enterprise In Ambo Town

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