Ensuring Financial Sustainability in Seasonal Production Enterprises: Toward a Seasonal Financial Cycle Framework
DOI:
https://doi.org/10.51699/cajitmf.v7i4.1343Keywords:
financial sustainability, seasonality, seasonal production, working capital, emerging marketsAbstract
Enterprises producing seasonal products face a structural mismatch between the timing of cash inflows and outflows, which conventional financial sustainability assessment largely ignores. This paper develops a conceptual framework — the seasonal financial cycle — for assessing and managing the financial sustainability of seasonal production enterprises. Drawing on capital structure theory, the financial distress prediction literature and efficiency measurement theory, we identify five mutually reinforcing channels through which seasonality affects enterprise financial condition: working capital immobilization, periodic liquidity shortages, cyclical debt accumulation, fixed cost pressure during idle periods, and price risk concentration. We show analytically that point-in-time financial ratios computed at annual reporting dates are systematically biased for seasonal enterprises, with the direction and magnitude of the bias determined by the position of the reporting date within the seasonal cycle. The proposed framework replaces static thresholds with stage-specific normative corridors, a cycle-recovery criterion and inter-cycle dynamic analysis, and implies a two-level scheme for efficiency assessment. The framework yields three testable propositions and provides a foundation for constructing an integral assessment model using quarterly panel data, with implications for financial managers, lenders and regulators in emerging economies with large seasonal sectors.
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