Using a company's financial data, it is possible to create financial ratios that are essentially snapshots and metrics into the condition of the business. Investors can see these numbers and compare them to similar businesses and industries to assess the state of their financial condition.
The question asks about season factors and different growth rates and how these affect these ratios and subsequent analysis. Seasonal factors in businesses cause distortions in these key ratios. Profitability ratios are one type of important financial ratios that calculate how much revenue competing companies are generating from sales of similar products or services. If a business decides to make a large purchase at the start of the year for the sake of volume discounts, this might distort their Q1 numbers from the rest of the quarters. Unpredictable events, such as weather, or predictable events, such as holidays, cause ratios to also be distorted at micro-level analysis.
Newer companies might experience greater growth rates than older, mature companies. A new company might not have long-term solvency, so their financial leverage ratios will not be high, but that does not mean the company is not viable or a good investment. Amazon, an incredible revenue-generating company, can have low profitability ratios compared to competitors, as it does not strive to generate profits as much as it does to increase overall value.
Tax services is an industry that faces significant season distortions. The busiest time would include January to April. TurboTax is a company owned by Intuit INC. They can address these problems by adding additional financial services under their management to address consumers financial needs year-round, instead of just during the tax season for tax filing purposes. They can add services like loans, investment vehicles, financial tracking, and other services to generate additional revenue.
Link to company: https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000896878&owner=exclude&count=40&hidefilings=0
Resources
Ehrhardt, M. C., & Brigham, E. F. (2015). Corporate finance a focused approach (6 ed.). Boston, MA: Cengage Learning
Vitez, O. (2017, November 21). Three Important Financial Ratios for Competitors. Retrieved from https://smallbusiness.chron.com/three-important-financial-ratios-competitors-3976.html
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