Final answer:
The natural business year ends when business activities reach their lowest point in a company's annual operating cycle. This timing is chosen to minimize disruptions during financial close. Firms generally cease operations due to continued losses, making profitability the key measure of a business’s viability.
Step-by-step explanation:
The natural business year ends when business activities have reached the lowest point in a company's annual operating cycle. This is not when the business has achieved a profit, nor six months after the company's fiscal year ends, and it's specifically not when business activities are at their peak. The reason behind this timing is that at the low point of the operating cycle, a company has the least amount of ongoing operations, making it the most practical time for closing the books and preparing financial statements without interfering with business processes.
Firms may cease to exist for various reasons, primarily related to profitability. Essential to business continuity, profits are the ultimate measure of success. Should a firm consistently encounter losses, which serve as a 'black thundercloud,' it may decide to exit the industry. This exit is a strategic response to a sustained pattern of losses, putting an end to continued financial hemorrhaging.