Seasonal effects on ratios
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Seasonal effects on ratios is a combination of seasonal factors can distort ratio analysis. At certain times of the year, a firm may have excessive inventories in preparation of a “season” of high demand. Therefore, an inventory turnover ratio taken at this time will be radically different than one taken after the season.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Seasonal effects on ratios. Seasonal factors can distort ratio analysis. At certain times of the year, a firm may have excessive inventories in preparation of a “season” of high demand. Therefore, an inventory turnover ratio taken at this time will be radically different than one taken after the season.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
