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The relationship between working capital management and profitability is extensively investigated in the literature; much of this literature tests this relationship using linear models. However, the relationship between the components of working capital, namely; receivables, inventories, trade payables and profitability, may not be linear. At low levels of receivables, inventories and trade payables, increasing the amount of working capital components may increase profitability up to a point, but above that point additional increases may harm profitability. The aim of this study is to test this expected nonlinear relationship using data on the firms quoted to Istanbul Stock Exchange Chemical, Petrolium, Rubber and Plastic Products Sector over the 2005-2016 period. Results of the Generalized Method of Moments (GMM) analysis indicates that there is a significant nonlinear and concave relation between receivables, trade payables and profitability ratios. As for the inventories the results are not inline with the theoric expectations.

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