In Ethiopia, recently there are few capital structure studies that focused on determining firmrnspecific and macro economic factors responsible to affect capital structure decision; in thesernstudies researchers include either profitability or performance of companies to understandrnwhether it had an effect on capital structure selection but they ignored the reverse effect ofrncapital structure on financial performance of companies. To understand this reverse effect thisrnthesis analyzes the effects of capital structure and debt maturity choice on financial performancernusing audited financial statements collected from each 10 sampled companies of Ethiopiaâ€™srnMetal and Engineering Industry for the time span of six years (2007 to 2012). The multivariaternOLS regression result of the study indicates capital structure has a significant and positive effectrnon financial performance (measured by return on equity) of the Metal and Engineering Industryrncompanies as it is measured by debt ratio; furthermore, short term debt ratio has significantrnwhereas long term debt ratio has insignificant but both positive effect as the study examined ifrndifferent level maturity of debt has a different effect on financial performance. Thus, the studyrnconcluded that data from Ethiopiaâ€™s metal and engineering industry companies support Trade-rnoff theories and despite to their significances no different effect in direction on financialrnperformance was found caused by levels of debt maturity. On the other hand, asset tangibility asrna controllable variable was found to have a significant and negative whereas company size andrnasset turnover were not. Finally, the study recommended that companies in Metal andrnEngineering industry should employ more debt in to their capital structure; however, thernindustry companies should give a through consideration to determine the optimal point to whichrnthey exhaustively take the benefits of debt; otherwise they will be exposed to bankruptcy risk duernto excessive utilization of debt