Impacts of Operational Efficiency on Profitability: Case Study on Large tax payer Merchandize Firms in Addis Ababa, Ethiopia

Operational efficiency is a crucial concern for profitability of merchandising firms. The ultimate purpose of this study is to examine the impact of operational efficiency on profitability of merchandise firms. In order to achieve the research objectives the researcher adopted explanatory research design with quantitative method of research approach. The study used secondary data collected from audited financial statements of ten merchandizing firms taken from ministry of revenue of Ethiopia, LTO ranging the time period from 2017 to 2021. The firms were selected by simple random sampling method from 50 target populations by using random number generator. The data were analyzed to identify the impact of fixed asset turnover, inventory turnover, total asset turnover and operating expenses ratio on profitability. The researcher applied descriptive statistics and regression analysis. The data were analyzed using E-Views software to investigate the impact of operational efficiency on profitability of merchandizing firms in Ethiopia. The result revealed that inventory turnover and total asset turnover have positive and significant effect on profitability, and operating ratio has a negative and significant influence to profitability of merchandising firms. Whereas, fixed asset turnover has an insignificant impact on profitability of merchandizing firms. As profitability of merchandizing firms affected by operational efficiency, it is recommended that merchandizing firms better give sufficient attention in managing their operation efficiently to generate more profit