FACTORS AFFECTING PROFITABILITY THE CASE OF ETHIOPIAN SELECTED PRIVATE CONSTRUCTION COMPANIES

Abstract

This study investigates factors affecting profitability the case of Ethiopian selected private construction companies. Profitability is one of the most important objectives of financial management because one goal of financial management is to maximize the owner` s wealth. This study examined the effect of independent variables that is firm size, liquidity, capital structure and working capital management on dependent variables that is profitability (ROA). The sample in this study includes twelve private construction companies panel data covering for five years period from 2011-2015. Secondary data that analyzed obtained from individual construction companies annual report of financial statements (Balance sheet and Profit/Loss account). The study used quantitative research approach and panel data regression. From the regression results; liquidity and working capital management are identified statistically significant and negative relationship with profitability. However, firm size and two control variables have negative and insignificant relationship with profitability. The dependent variable; capital structure has positive and significant relationship with construction profitability. Finally to summarize and to make on good decision on factors affecting construction company profitability, contractors need to look the liquidity, capital structure, and working capital management before making an investment decisions. Because these factors have a significant impact on factors affecting construction profitability either positively or negatively in Ethiopian private construction companies