We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What Is a Business Cycle Recession?

Malcolm Tatum
By
Updated: May 17, 2024
Views: 19,104
Share

A business cycle recession is a common element found in any business cycle. Essentially, this portion of the cycle describes a period in which the demand for the goods and services of the company decreases, a situation that typically means a decrease in sales revenue. The severity of the recession will vary, with some businesses experiencing mild downturns due to seasonality, while other companies experience a continuous cycle of extremes in both recession and expansion. Typically, the recession is followed by a short period known as a trough before demand increases once more and the company enters into a phase of expansion.

There are several reasons why a business cycle recession may take place. Shifts in the economy are one of the prime reasons why a company may see its sales revenue go back to a lower level known in former years. When consumer income is adversely affected by the economy, this means those consumers will begin to change their purchasing habits. Therefore, companies producing goods and services considered to be non-essential by those cash-strapped consumers are likely to experience a decrease in demand, which in turn causes profits to move downward into a recession.

Another reason for business cycle recession changes in consumer tastes. This can occur when new products are offered in the marketplace that effectively render older products obsolete in the minds of consumers. When this happens, companies producing those older products will see sales decline and cash flow reduced. Depending on the nature of the products, aggressive advertising to new markets or possibly enhancing the products so they are more competitive may slow the downturn, allow the sales to level off into a trough situation, and then slowly begin to enter a recovery period in terms of sale revenue that eventually leads the way to a period of expansion.

The concept of a business cycle recession can be applied to an individual company, an industry, or even the business community within a given country. In each scenario, assessing the reasons for the downturn and projecting how long that situation will persist will often provide valuable ideas on how to deal with the situation. For this reason, many corporations look closely at the movement of the business cycle as it relates to the industry in order to anticipate events that could cause a downturn in revenue. At the same time, keeping in touch with the development and pending release of new technology that could have an adverse effect on the profitability of the product line, and creating strategies to counteract that effect, could help to minimize business cycle recession and allow the company to move through the phase and on to recovering and enjoying increased sales once more.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Editors' Picks

Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.wisegeek.net/what-is-a-business-cycle-recession.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.