The Effect of Working Capital Management on the Profitability Textile Manufacturing Share Companies in Ethiopia

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The management of a company's current assets and liabilities is known as working capital management. Having an adequate amount of working capital can assist firms in maximizing their profits. The aim of this research was to examine how managing working capital affects the profitability of textile manufacturing companies in Ethiopia. The study used a quantitative research approach and analyzed secondary data collected from six manufacturing share companies' financial statements. The data was collected from a population of 66 observations covering an 11-year period (2011-2021) without applying any sampling technique. By employing SPSS and STATA statistical software, the panel data was quantitatively examined using fixed effect model estimation method. Major working capital management components, that are identified throughout this empirical study, such as account receivable period, cash conversion cycle and inventory conversion period shows, a statistically significant negative relationship with profitability, according to the findings. It suggests that, in order to optimize profit and raise the firm's worth, company management must keep the cash conversion cycle and other components of working capital at their optimal levels. On the other hand, the study has found that account payable period had shown statistically significant positive effect on the profitability of textile manufacturing companies thru return on asset. Additionally, the study has discovered that current ratio, has a considerable negative link with profitability, but sales growth has a strong positive relationship with profitability. In contrast to the previous findings, the researcher disclosed that a statistically insignificant positive association between the share companies’ debt and profitability.



Working Capital Management, Return on Asset, Quantitative, Profitability, Textile Manufacturing, Share Companies.