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March 4, 2026Open Access

Unpacking the Relationship between Sales Growth and Profitability

Key Points

This research aims to clarify the relationship between sales growth and profitability in high-technology firms.
Analyzed data from 1,591 high-technology firms in Russia from 2013 to 2017.
Examined the relationship between sales growth and profitability using statistical models.
Investigated moderating factors including firm size, age, financial leverage, and asset turnover.
The relationship between sales growth and profitability follows an inverted U-shaped curve.
Smaller firms can convert sales growth into profitability more effectively.
More mature firms, firms with lower financial leverage, and those with higher asset turnover also show better profitability from sales growth.

Abstract

In a study of 1,591 high-technology firms operating in Russia over the course of 2013-2017, we investigate the relationship between two alternative performance indicators, sales growth and profitability, that have demonstrated an inconsistent relationship in prior research. We demonstrate that the relationship between these indicators follows an inverted U-shaped curve and is moderated by firm size, age, financial leverage, and asset turnover. Specifically, small firms, mature firms, firms that borrow less, and firms with higher asset turnover are advantageously positioned to turn sales growth into profitability.

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