Tefferi Ghebray (PhD)Eyobed Miriye Tadesse2024-03-292024-03-292023-12-28https://etd.aau.edu.et/handle/123456789/2629This study aims to address the challenges associated with evaluating profitability in the Ethiopian banking industry, the evaluation of profitability within the Ethiopian banking industry faces challenges associated with the reliance on high annual gross profit as a comparative benchmark. This research addresses this issue by investigating and contrasting the influence of liquidity and solvency on the profitability of Ethiopian private banks. The primary objective is to establish an industry benchmark through a thorough desk review, evaluating the annual reports of Ethiopian private banks using liquidity, profitability, and solvency ratios. Adopting a case study research methodology, the study selects 16 private banks registered under the National Bank of Ethiopia based on the accessibility of their accounting statements. The analysis focuses on return on assets (ROA) as the dependent variable and considers current ratio, debt ratio, interest coverage ratio, and total debt to equity ratio as independent variables. The study employs correlation coefficient analysis and ANOVA F-test within the framework of multiple regression analysis to reveal statistically and practically significant findings. Notably, the research identifies a positive correlation between the current ratio and ROA, emphasizing the importance of liquidity in driving profitability among the sampled banks. Conversely, the study highlights a negative relationship between the debt ratio, interest coverage ratio, and ROA, underscoring the adverse impact of high debt and low interest coverage on profitability within the Ethiopian private banking sector. In conclusion, these findings underscore the critical significance of considering liquidity and solvency factors in the evaluation of profitability within the Ethiopian banking industry, providing valuable insights for stakeholders and policymakersen-USThesis