The major focus of this study is to investigate effect of leverage on profitability. Twelve mediumrntax payersâ€™ food and beverage manufacturing companies in Addis Ababa were included in thernsample that had at least eight years annual report. Document review was used for collectingrndata from 2011/12- 2017/18 annual reports. In line with this objective, the study adoptedrnquantitative methods of research approaches to test the study hypothesis. The study appliedrnreturn on asset as the measurement of profitability and panel data model with its random effectrnestimate to test a series of hypotheses that emerge through the review of existing literature. Therncollected data then analyzed using descriptive statistics, correlation analysis, and panel datarnregression analysis. To confidently forward conclusion, normality, multicollinearity,rnheteroscedasticity and autocorrelation tests were conducted on the data. The data then wasrnprocessed using Eviews 8 statistical package.Then, regression result indicates that leverage hasrna negative relationship with profitability and statistically significant. While managerialrnefficiency and capital intensity has a positive and significant effect on profitability and firmrngrowth has a positive insignificant effect on profitability. Inflation is the only independentrnvariable which does not have significant effect on profitability in this study. Therefore, mediumrntax payersâ€™ food and beverage manufacturing companiesâ€™ for better and stable growthrnrecommended that must not depend heavily on leverage funds, as all leverage has its impact onrntheir earning which ultimately effects its portability and inventors perception for firms. Finallyrnfirm with high leverage ratio have to examine their efforts to control unwanted risk and exposurernwhich will impact their portability and hit their market potential.