MJAAR

Profitability Ratios and Business Decisions in Companies: A Case Study of Mukwano Group of Companies

Namirembe Victoria, Irumba Alex


Abstract

This study examined the influence of profitability ratio analysis on business decision-making at Mukwano Group of Companies, Uganda's largest indigenous manufacturing conglomerate. As businesses operating in Uganda's increasingly competitive consumer goods market faced intensifying pressure to make informed, data-driven strategic and operational decisions, the systematic use of profitability ratios — including return on assets (ROA), return on equity (ROE), gross profit margin (GPM), net profit margin (NPM), and earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins — as inputs to investment, pricing, production, and financing decisions had emerged as a critical determinant of corporate performance. Drawing on a cross-sectional survey of 142 management, finance, and operations staff at Mukwano Group, supplemented by analysis of audited financial statements for the period 2018–2023 and key informant interviews with senior management, the study employed descriptive statistics, Pearson correlation, multiple linear regression, and Structural Equation Modelling (SEM) to examine how the quality of profitability ratio analysis, the frequency of ratio-informed decision review cycles, and management capacity for ratio interpretation influenced investment decision quality, pricing decision quality, and financing decision quality. The structural model revealed that analytical quality exerted the strongest total effect on decision quality (total path coefficient = 0.512), with interpretation capacity partially mediating this relationship (indirect path β = 0.168). Collectively, the three profitability ratio dimensions explained 65.4% of the variance in business decision quality (R² = 0.654, F = 41.38, p < .001). The study recommended systematic financial dashboard adoption, ratio interpretation training, and board-level financial literacy strengthening as priority interventions.

Keywords

Profitability Ratios Business Decisions ROA ROE Gross Profit Margin Financial Analysis Mukwano Group Manufacturing SEM Uganda
Metropolitan Journal of Academic and Applied Research

Cite This Article

Namirembe Victoria & Irumba Alex (2026). Profitability Ratios and Business Decisions in Companies: A Case Study of Mukwano Group of Companies. Metropolitan Journal of Academic and Applied Research, 5(9). https://journals.miu.ac.ug/pages/article.php?article_id=1873

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