ACCOUNTING PRACTICES AND FINANCIAL PERFORMANCE OF MANUFACTURING COMPANIES IN RWANDA PERIOD 2017-2021 A Case of Sulfo Rwanda Industries Ltd

Abstract

The general objective of this research was to assess the effect of accounting practices on financial performance of manufacturing companies. Sulfo Rwanda industries faces the issue of unprofitable and this was indicated by declining return on assets is a sure sign of trouble around the corner, especially for growth companies. Issues of unprofitability are shown with decline in profit for instance, Sulfo Rwanda reported a decline of net profit, ROA and ROE. Different concepts, theories and available related literatures published on the variables made this study were used. In this study the researcher adopted descriptive and correlation research design to enable the researcher accomplishes the objectives of the study. The population of the study composed of employees of Sulfo Rwanda industries ltd.. So, target population in this research study is only 31 employees from internal audit, logistic, Finance department of Sulfo Rwanda industries. The study also used financial statements of sulfo Rwanda industries for the year 2017 and 202. The questionnaires were distributed to the respondents as an instrument for data collection, and data collected was analyzed using SPSS version 22. Sulfo Rwanda’s ROA in 2017 is 10.5%. Sulfo Rwanda’s ROA in 2018 is 6.2%. In 2019, 2020, and 2021, the return on asset ratio are 10.2%,15.8, and 13% respectively means that the Sulfo Rwanda industry is investing a low amount of capital into its production while simultaneously receiving high income. Sulfo Rwanda’s ROE is 11% in 2017. In 2018 the ratio is the following 6.4% indicates that Sulfo Rwanda Industry’s return on equity is in declined based on previous year. Sulfo Rwanda’s ROE is 10.6% in 2019. This means that every Rwf of common shareholder's equity earned about Rwf 10.6 in 2019. Table 16 also shows that in 2020 and 2021 the ratio are the following 16.5% and 13.5% respectively and this indicates that Sulfo Rwanda’s return on equity are fluctuated from 2017 to 2021. Net profit margin for Sulfo Rwanda industries for 2017 of 2.4% of the full income revenue is profit. In 2018, Sulfo Rwanda had net income margin of 1.96% way that every Frw1 sale contributes 1.96 cents closer to the net profit of the commercial enterprise. Net profit margin of Sulfo Rwanda industries in 2019, 2020, and 2021 are 2.86%, 4.41%, and 3.49% respectively of the total sales sales is profit, that means that Sulfo Rwanda industries has Frw 2.86, 4.41, and 3.49 of interest earnings for every Frw of sales. The study findings arising from the study, it can be concluded that accounting practices composed by respect of GAAP while recording, financial reporting, compliance with accounting standards and principles, availability of qualified staff in accounting, and compliance with IFRS affects positively financial performance of manufacturing companies at the significant value of 0.000 and r=0.886, implying that that there is significant relationship between accounting practices and financial performance of manufacturing companies. However, researcher recommends that Sulfo Rwanda industries should publish on time its annual reports for improving the quality of its financial report.