DETERMINANT OF PROFITABLITY FIRMS IN LEATHER INDUSTRY IN ADDIS ABABA ETHIOPIA

Abstract

Determinant of profitability of large manufacturing leather companies of Addis Ababa in Ethiopia. This study sets out to examine the determinants of the leather industry profitability specifically focused on large manufacturing companies of the sector who submitted their annual financial statements report to LTO partially from during the period 2008 up to 2018 and partially from 2014 to 2018. Consequently, the researcher used secondary data obtained from the financial statement balance sheet and income statement of leather companies. The study used explanatory research design to check the relationship between dependent variable profitability and independent variables (liquidity, capital adequacy, leverage, tangibility of asset, firm size, managerial efficiency, and inflation). The regression result showed that , firm size, tangibility of asset, and capital adequacy have statistically significant and negative impact on profitability but managerial efficiency has statistically insignificant and negative impact on profitability, on the other hand, leverage, liquidity and inflation have statistically insignificant and positive impact on profitability. Quantitative research approach was adopted. The study conclude managerial efficiency has negative impact on profitability so the stakeholders that give more attention on managerial efficiency. The researcher recommend that the manager should have to consider how they utilize firms’ resource efficiently and effectively.