When a construction companies are unable or struggles to satisfy its financial obligations as they mature, it is said to be in financial difficulty. Researchers rarely perform financial hardship studies that are matched with the needs of the Amhara Region's building industry, which is why this study was conducted. As a result, the primary goal of this research was to investigate macro & firm-specific factors. In order to achieve the objective, secondary data was collected from twelve construction companies for a sample period covering from 2013 to 2019 and analyzed using a random effect (RE) regression model. The endogenous variable used in the study was financial distress, which is measured by the debt service coverage ratio, while the exogenous variables employed in the study were leverage, liquidity, profitability, earnings, age, and economic growth. A quantitative research approach and explanatory design were adopted in carrying out this research. The results from the panel random effect regression output revealed that except for leverage which had a negative but significant effect on the debt service coverage ratio other variables like liquidity, profitability, earning, age and GDP have a positive and statistically significant effect on the debt service coverage ratio. On the other hand, leverage has a negative and statistically significant effect on a firm’s debt service coverage ratio. In general, the study concludes that both firm-specific and macroeconomic factors determine the level of financial distress in Amhara construction companies. Finally, the study discovered that firm policies that improve the firm's profitability, liquidity, and earnings, as well as strategies that reduce the firm's leverage will help to lower the level of financial distress in companies.