The Effect of Working Capital Management on Firms Profitability: The Case of Steel Manufacturing Firms in Addis Ababa

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Addis Ababa University


The purpose of the study is to examine the effect of working capital management on profitability of Steel manufacturing firms in Addis Ababa for the period of 2013-2017 fiscal year. To achieve the objectives of this study, the study employed convenience and purposive sampling techniques and selected sixteen steel manufacturing firms as a sample and secondary data was collected from the selected firms’ financial statement. The study adopt quantitative research approach and employed E-views 8 software and the result analyzed using descriptive statistics and regression analysis to ascertain the relationship between the independent variables of working capital components viz., Account receivable period, Inventory holding period, Account payable period, and Cash conversion cycle and the dependent variable (Gross Operating Profit).The result revealed that there is strong negative relation between account receivable period and steel manufacturing firms profitability, likewise strong positive relation between account payable period and steel manufacturing firms profitability, but both inventory holding period and cash conversion cycle have no effect on steel manufacturing firms profitability. The study recommended that the managers of steel manufacturing firms should have minimized cash collection period in order to increase the steel manufacturing firm profitability. Additionally, managers should have settled their credit in long time as possible to enhance steel manufacturing the firms’ profitability.


A Thesis Submitted In Partial Fulfillment of The Requirements for The Award of The Degree of Master of Science in Accounting and Finance


Account payable period, Cash conversion cycle, Inventor holding period, working capital management