<p>This study examined how debt and liquidity management impact the profitability of agricultural cooperatives in the United States (U.S.). Employing a U.S. Farm Credit System panel dataset containing observations on U.S. agricultural cooperatives for calendar years 2011–2015, various fixed-effects models of agricultural cooperative profitability were estimated. A nonlinear relationship was found to exist between a cooperative’s profitability and its level of debt, with profitability rising when the cooperative’s debt-to-assets ratio is low, but falling when it is high, implying the existence of an optimal debt-to-assets ratio beyond which greater reliance on debt financing reduces profitability. The optimal debt-to-asset ratio was lower for farm supply cooperatives than for grain marketing cooperatives. Inventory liquidity was the most critical determinant of agricultural cooperative profitability, Faster inventory turnover increased profitability, a result that appears to be unique to agricultural cooperatives. The study findings strongly suggest that financial decision-making within cooperatives, especially decisions involving capital structure, should be approached with more nuanced models that account for potential nonlinearities in debt financing. Cooperative management should tailor working capital strategies to the specific operational and relational dynamics of their cooperative type rather than adopting a one-size-fits-all approach.</p>