Working Capital Management is an important corporate financial decision since it directly affects the profitability of the firm. Because of its routine nature, working capital management is the most important one among all issue of financial management. The purpose of this study is to examine the impact of working capital management on profitability of selected micro and small enterprises found in Bahir Dar city administration. This study employed quantitative approaches and explanatory research design in order to achieve the objectives. The study used audited financial statement of sixty (60) purposively selected micro and small scale enterprises for a period of five years (2016-2020) with the total of 300 observations. Accounts receivable period, inventory conversion period, account payable period, and cash conversion cycle were used as independent variable to measure working capital management. The dependent variable, firm profitability, was measured by return on asset. For data analysis the study used descriptive analysis, correlation analysis and a fixed effects regression model. The result of fixed effects regression showed that; there was significant positive relation between account receivable period and profitability indicating that aggressively collecting receivable adversely affects micro and small enterprises profitability. There was significant positive relation between inventory holding period and profitability suggesting that maintaining high inventory increase sales. Accounts payable period had significant negative impact on profitability indicate that less profitable firm wait longer periods to pay their obligation. There was significant negative relation between cash conversion cycle and profitability suggesting that sample firms improve their profitability by shortening the time gap between firm’s actual cash inflows and outflows. The study conclude that liberal credit collection, holding high inventory, quick payment of debt and keeping the length of cash conversion cycle to possible minimum level can increase the profitability of a firm.