2.3 Determinants of financial performance in manufacturing firmsAnalysis of the determinants of corporate financial performance is essential for all the stakeholders, but especially for investors. The value of shareholders, defined as market value of a company is dependent on several factors: the current profitability of the company, its risks, and its economic growth essential for future company earnings. All of these are major factors influencing the market value of manufacturing firms.Branch (2000) argue the opposite, that financial indicators based on accounting information are sufficient in order to determine the value for shareholders. A manufacturing firm financial performance is directly influenced by its market position. Profitability can be decomposed into its main components: net turnover and net profit margin. Ross et al. (1996) argues that both can influence the profitability of a company one time. If a high turnover means better use of assets owned by the company and therefore better efficiency, a higher profit margin means that the entity has substantial market power.Risk and growth are two other important factors influencing manufacturing firms financial performance. Since market value is conditioned by the company’s results, the level of risk exposure can cause changes in its market value. Economic growth is another component18that helps to achieve a better position on the financial markets, because market value also takes into consideration expected future profits. The size of the company can have a positive effect on financial performance because larger firms can use this advantage to get some financial benefits in business relations. Large companies have easier access to the most important factors of production, including human resources. Also, large organizations often get cheaper funding. In the classical theory, capital structure is irrelevant for measuring company performance, considering that in a perfectly competitive world performance is influenced only by real factors.Recent studies contradict this theory, arguing that capital structure play an important role in determining corporate performance. Barton & Gordon (2008) suggest that entities with higher profit rates will remain low leveraged because of their ability to finance their own sources. On the other hand, a high degree of leverage increases the risk of bankruptcy of companies. Total assets are considered to positively influence the company’s financial performance, assets greater meaning less risk. A large volume of sales (turnover) is not necessarily correlated with improved performance. Studies that have examined the relationship between turnover and corporate performance were inconclusive. The main objective of the company has evolved over time; the need for short term profit is replaced by the need for long-term growth of the company (sustainable growth). Therefore, sustainable growth rate higher than 1 would have a positive impact on performance. For the companies listed at the stock exchange, its ability to distribute dividends is a proof of stability.19Management accounting information an analysis is vital in the management of manufacturing companies in Kenya, thus as a discipline moving from a passive role as information providers for decision-makers (Kibera, 2000). The trend of this shift has resulted to a range of remarkable innovators in management accounting. This is evident through the adoption of innovative modern management accounting techniques like activity based costing, strategic management accounting, just in time, lifecycle costing and contemporary performance measurement systems such as balance score card. As a result of this new developments some researchers argue that relevant lost may be regained in the near future. This resulting gain seems to be gradually adopted by Kenyan manufacturing companies.2.4 Empirical StudiesWijeywardena and Zoysa (1999) in a comparative analysis of management accounting practices in Australia and Japan investigated the differences in the adoption of management accounting techniques through a survey questionnaire which was mailed to 1000 largest manufacturing companies in each country. The size of the company was based on total assets. A total of 217 Japanese companies and 231 Australian companies responded to the 31 questions asked covering various aspects of managerial accounting techniques. This analysis involved comparisons of techniques in different cultural contexts. Major cultural differences identified in the study were collective decision making, unique company philosophy, usage of small firms as sub contractors, company specific cost accounting training for each employee, and the difference in educational background of management