This study investigates the relationship between firm profits, R&D expenditure, firm size and financial leverage in China over the period 2009-2015. The starting point of this paper is to estimate how R&D inputs affect firm future performance. We consider two different regression models to verify the hypotheses from the empirical literature. Our first approach is to apply panel data regression models estimating the individual specific effects within 11 industries. The second approach is to evaluate interaction effects between R&D expenditure, firm size, and leverage. Then we test whether individual heterogeneity is correlated with other independent variables. Our last approach is to estimate VAR models and confirm the dynamic relationship between the variables at the first-order lag. We also determine whether moderating variables change the strength of the relationship between R&D expenditure and profits. Specifically, moderating effects of employees' education level, firm size, and leverage are herein analyzed, together with a discussion of Granger causality. We find that the effect of the first-lag of R&D expenditure on profits is positive from the results of panel data regression model. Compared with the first and second lag of R&D expenditure, the third-lag of R&D expenditure has a greater positive effect on profits. In addition, the interaction variables of R&D and other two factors have different effects on firm profits. We suggest that the moderating variables change the relationship between the variables of the VAR model. We also support idea that Granger causality exists in some pairs of the first-lags between R&D expenditure, firm profits, firm size and leverage.