Small and medium-sized enterprises of the Russian Federation: An empirical analysis of the relationship between working capital and profitability

Subject. This article examines the relationship between the structure of working capital and the profitability of small and medium-sized enterprises. Objectives. The article aims to search for the optimal level of working capital, ensuring maximum profitability while maintaining the necessary level of liquidity, as well as develop recommendations on working capital management for Russian organizations. Methods. For the study, I used statistical and correlation analyses, and data visualization. Results. The article finds a dependence between the working capital volume and the return on equity, which indicates the existence of an optimal level of working capital. It identifies significant sectoral and regional differences in the structure of working capital, and determines the optimal range of current liquidity ratio, within which the highest return on capital gets achieved. Conclusions. Strategic management of working capital should be based on a balance between liquidity and profitability. Adaptive working capital management models that take into account industry and regional specifics are necessary to increase the financial stability of small and medium-sized enterprises. The proposed recommendations can serve as a basis for optimizing financial strategies and improving the effectiveness of managerial decision-making.