CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The manufacturing industry plays a major role as the motivate the nation at large. This is because the sector is part of protected and restoration system of an economy and successful operation of the industry can set vigour for other industries and development of an economy (Abate 2012). Indeed, a well developed and envolved manufacturing industry is critical to conditions for economic development as its provide long term funds for long term investment for the country.
Firm characteristic are those incentives variable that affect the forms decisions both internally and externally. They refer to ownership structure internally and externally, levels of diversification financial leverage, profitability and liquidity (Lang and Lndholm, 2013). A firm is required to maintain a balance between liquidity and profitability while conducting its day to day operations. Liquidity is a precondition to ensure that firms are able to meet its short term obligations and its continued flow can be guaranteed from a profitable venture. The importance of cash as an indicator of continuing financial health should not be surprising in view of its crucial rolel within the business (collect and Hasky, 2015).
