THE EFFECT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY OF TOUR AND TRAVEL SERVICE COMPANY IN ETHIPIA: IN CASE OF NATIONAL TOUR OPERATION AND TRAVEL AGENCY PLC

Abstract

The aim of this paper is to identify the effect of working capital management on profitability of tour and travel service companies in Ethiopia in case of national tour operation and travel agency plc were operating in the years from 2007 to 2022. The paper has been structured based on the six major components of working capital management namely: Inventory; Debtors; Cash on hand and at Bank; Trade Receivables; Creditors and Account Payables. The researcher measured company profitability using return on asset. The researcher used quantitative approach, and an explanatory research design in order to show causal and effect relationships between dependent and independent variables. Data from financial statements covering the period from 2007-2022 of National tour operation and travel agency analyzed using a time serious data least squares multiple regression technique using the E-views 10 software package. The study has identified that, at a significance level of 5%, all the independent variables: Inventory, Debtors, Cash on hand and at Bank, Trade Receivables, Creditors and Account payables, have significant negative effect on the dependent variable Return on Asset of tour and travel service companies in Ethiopia in case of NTO and Travel Agency PLC. The researcher recommends the management of the firms to follow a working capital management policy that reduces the problem of inventory, debtors, and cash on hand and at bank trade receivables, creditors and Account payables.