“Comparative Financial Performance Assessment Textile Manufacturing Companies Operating Inside and Outside Industrial Parks: The Case of Addis Ababa and Its Surrounding
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Date
2020-03
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A.A.U
Abstract
The textile industry has a key role when it comes to enhancing the economic growth of a country. Because of this, the Ethiopian government chose to focus on this sector as a key driver including making it a priority sector to reside in most industrial parks. The concept of industrial parks is relatively a new phenomenon in the country and as such there is limited research conducted regarding industrial parks and the textile industry. However, there are several researches conducted on the textile industry alone with a specific focus on issues related to management and financial performance. Regardless of these studies, not enough research is conducted to reveal the difference in financial performance, mainly profitability and efficiency between textile manufacturing companies operating inside and outside industrial parks. The main objective of this study is to identify the difference in financial performance between textile manufacturing companies operating inside industrial parks (resident companies) and those operating outside industrial parks (Nonresident companies) and prove the statistical significance of this difference. The research employed net profit ratio, ROI, total asset turnover ratio, fixed asset turnover ratio, working capital turnover ratio and inventory to net working capital ratio in order to identify the profitability and efficiency of both resident and nonresident companies and this in turn is to assess their financial performance. Then the research used the Mann Whitney U test to compare the financial ratio results from both groups and analyze if the stated difference is statistically significant or not. Major findings of the study is that there is a difference between financial performance of textile manufacturing companies operating inside and outside industrial parks. On average, resident companies have better profitability and efficiency ratios than nonresident companies. And this difference is statistically significant at least for the majority of financial performance indicators. One of the major suggestions from this study is for the government to continue to encourage and incentivize manufacturers to use industrial parks as their benefit clearly contributes to the positive financial performance of their tenants.
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Keywords
Benefits of industrial parks, Financial performance