Assessment of Financial Management Practices on Private Manufacturing Companies in the Case of Mekelle City

Abstract

The objective of this study was to evaluate whether financial management was applicable in the selected organizations or not. Data were collected from primary sources. The analytical tool was used to analyze the data by describing the basic features of the data in the study, and to provide summaries of the variables and measures. Most of the manufacturing companies have applied financial reporting and analysis management; working capital management; and accounting information system management practices. Even if there was an existing accounting information management practices, there was a difference among the companies in using different package of software to fasten and incorporate all activities in one system. On the other hand, the companies did not apply financial management practices related to the capital structure and capital budgeting management practices. The companies should exercise to maintain suitable ratio between debt and total capital; use effective financial leverage and should review the debt level in order to use it for making finance decisions. Moreover, the companies should evaluate their future projects and fixed assets after acquisition using different capital budgeting techniques rather than a simple determination of accounting profit. The variables used in the study were not exhaustive. Thus, future research may incorporate other financial management practices such as budgeting and CVP analysis and the potential researchers may also assess the practices in different sectors.

Keywords: Financial Management Practices, Financial Management, Accounting Information System, Capital Budgeting, Capital Structure, Financial Reporting and Analysis & Working Capital