This study sought to investigate the relationship between capital structure and financialrnperformance of cement companies in Ethiopia. The study applied explanatory research design.rnIn order to answer the research question, secondary data was collected from the sample of 8rncement companies in Ethiopia during the period 2010-2014. To examine the relationshiprnbetween capital structures which is measured by long term debt to equity ratio and financialrnperformance measured by the accounting measures of return on asset (ROA) and return onrnequity (ROE), a random effect multiple regression model was employed. A computer packagernEVIEWS version 8 was used to solve the multiple regression equation used in this study. Fromrnthe regression model, the study found out that capital structure measured by long term debt tornequity ratio (LTDTE) has significant positive relationship with return on asset (ROA) andrncontrol variables such as tangibility(TAN) and size has significant positive relationship withrnreturn on asset (ROA) and capital adequacy(CA) and growth opportunity (GRO) hasrninsignificant positive relationship with return on asset (ROA), Beside this, capital structurernmeasured by logarithm of long term debt to equity ratio (LOGLTDTE) has significant negativernrelationship with return on equity (ROE) and control variables such as tangibility (TAN), capitalrnadequacy(CA) and logarithm of liquidity(LOGLQ) has significant positive relationship withrnreturn on equity (ROE), while size and change in gross domestic product(DGDP) hasrninsignificant positive relationship with return on equity (ROE). Whereas business risk (BR) hasrnsignificant negative relationship with return on asset (ROA) and return on equity (ROE).rnTherefore, an appropriate mix of capital structure should be adopted in order to increase thernfinancial performance of cement companies in Ethiopia.rnKey words: Capital structure and financial performance