Determinants of Financial Performance of Floriculture Companies in Oromia Regional State of East Shoa Zone

Abstract

This study aimed to investigate the determinants of the financial performance of floriculture companies in the Oromia Regional State - East Shoa Zone. The study used an explanatory research design with panel data for the period of 2011 to 2020 by selecting purposively 10 samples out of 11 farms. Financial performance is represented by the return on assets. Liquidity, leverage, asset utilization, operating expense, cash conversion cycle, innovation, farm size, and age were used as independent variables, and an exchange rate as a control variable. Furthermore, the collected data were analyzed by using descriptive, correlation, and regression analysis techniques. The random effects model was chosen, and the data were summarized using E-views 10 statistical software. The findings revealed that leverage, asset utilization, cash convection cycle, and farm size had a positive and significant effect on return on assets, whereas liquidity, operating expenses, innovation, and farm age had negative and significant effects, yet exchange rate had a negative and insignificant effect. The findings of the study suggest that reinvestment of idle resources, maintaining an optimum level of debt, arranging group exporting, capital-intensive approach, outsourcing non-operating activities, locally supplying rose seeds, and diversifying the asset base are recommended to be in place to sustainably enhance the return for flower farms.