Seasonal trading
A reporting-date balance may not represent the entity’s typical position. Compare equivalent seasonal periods where possible, consider average balances and review monthly cash flows or other relevant information. Seasonality can affect interpretation of inventory days, liquidity and profitability; do not automatically time-apportion annual results evenly for a mid-year group acquisition.
Worked example
A toy retailer holds high inventory in November and sells much of it in December. A December year-end current ratio may differ substantially from the position before the selling season.
Common mistake
Treating a year-end ratio as an average for the year or dividing annual profit evenly when profits are strongly seasonal.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |