Determinants Of Profitability Performance Of Wheat Flour Manufacturing Firms

Abstract

The aim of this paper was to examine the factors that determine the profitability performance of wheat flour manufacturing firms in case of Adama City. The study employed explanatory research design to assess the relationship between profitability and its determinant factors. Purposive sampling method was used to select sample wheat flour companies. Balanced panel data was analyzed by using descriptive statistics and correlation analysis. Fixed effect model in the form of multiple regression analysis was applied to analyze the annual data generated from the annual statements of the selected flour factories and annual reports of Ministry of Finance and Economic Development covering a period of 2007 to 2014 G.C. In this study ROA was used as the measure of profitability performance. The paper includes size, operating cost efficiency, capital efficiency, growth, liquidity, tangibility and age of a company as internal independent variables and food inflation rate and real GDP growth rate as external independent factors that determine the profitability of wheat flour manufacturing firms of Adama City. The study found that from the company specific variables capital efficiency, size the firm and age of the firm have significant impact on profitability performance of wheat flour manufacturing firms.