Browsing by Author "Jarso Halake"

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    Effect of Leverage on Profitability of Food and Beverage Manufacturing Companies in Addis Ababa
    (A.A.U, 2020-05) Jarso Halake; Abebe Yitayal
    The major focus of this study is to investigate effect of leverage on profitability. Twelve medium tax payers’ food and beverage manufacturing companies in Addis Ababa were included in the sample that had at least eight years annual report. Document review was used for collecting data from 2011/12- 2017/18 annual reports. In line with this objective, the study adopted quantitative methods of research approaches to test the study hypothesis. The study applied return on asset as the measurement of profitability and panel data model with its random effect estimate to test a series of hypotheses that emerge through the review of existing literature. The collected data then analyzed using descriptive statistics, correlation analysis, and panel data regression analysis. To confidently forward conclusion, normality, multicollinearity, heteroscedasticity and autocorrelation tests were conducted on the data. The data then was processed using Eviews 8 statistical package.Then, regression result indicates that leverage has a negative relationship with profitability and statistically significant. While managerial efficiency and capital intensity has a positive and significant effect on profitability and firm growth has a positive insignificant effect on profitability. Inflation is the only independent variable which does not have significant effect on profitability in this study. Therefore, medium tax payers’ food and beverage manufacturing companies’ for better and stable growth recommended that must not depend heavily on leverage funds, as all leverage has its impact on their earning which ultimately effects its portability and inventors perception for firms. Finally firm with high leverage ratio have to examine their efforts to control unwanted risk and exposure which will impact their portability and hit their market potential.