The main aim of this research is to investigate the root causes and impact of defective yarnrnon spinning operation, in case of Ayka Addis Textile Company. A preliminary survey wasrnconducted at the company by taking a five month back data, the result shows a high defectrnrate of yarn was present in the company. Defects are still dominant in the manufacturingrnindustry even though the attempts by companies to implement measures to eliminate them.rnMeasuring the effects of these defects on their contribution to losses in monetary value isrnlikely to assist the company to identify the major causes and then they take a measure torneliminate or minimize the root causes of these defects. An investigation of the root causes ofrnthe spinning department of Ayka Adis Textile Company was conducted using a root causernanalysis technique also the impact of the yarn defects in monetary value is assessed, thernassessment showed the company is suffering in financial loss of around 20,000,000 birr, inrn2018 budget year due to production of defects. Pareto analysis, and why analysis tools werernused to discover this root causes of defects which leading to monetary loss. Also the identifiedrnfrequent defects were analysed to minimize their root causes.