The relationship between capital investment and firms' financial performance has for some time been an important concern to many stakeholders in the business environment. This paper aims to study the effect of capital investments on financial performance from small and medium enterprises (SMEs) perspective. The study adopted a panel research design with a balanced data of 36 SMEs from the clientele list of three Accounting Firms in the Upper East region of Ghana. The study covered a period of five (5) years, from 2013-2017. The results were analysed using a fixed effect regression model. Capital investment was measured by the ratio of non-current assets to total assets while the financial performance was measured by the return on assets of the firms. The study revealed that the SMEs annual earnings have showed an upward trend over the study period with an average financial performance of 17.64 per cent. However, the average capital investment ratio was 32.04 per cent over the five-year period with a general downward trend in capital investments in the investment period. The study further established that capital investment as a sole variable has an adverse effect on SMEs financial performance. However, with firm-level variables (such as firm size and liquidity) and macro-economic variables (such as interest rate, exchange rate, and inflation rate) as control variables, the study established a significant and a positive effect of capital investments on financial performance. Based on the findings of the study, recommendations for owners and managers of SMEs have been developed.