During a company’s fiscal year, there are four three-month periods known as fiscal quarters. During these periods, a company’s financial activities and statements are calculated, processed and reported.
Public companies are required to make quarterly disclosures to investors regarding their economic performance, but even small, non-public companies typically break down their finances into these four sections to better analyze how they are doing throughout the calendar year.
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The Four Fiscal Quarters
| Quarter | Time Period |
|---|---|
| Q1 | January – March |
| Q2 | April – June |
| Q3 | July – September |
| Q4 | October – December |
What Happens Each Fiscal Quarter?
A well-run company with a proper vision will set out specific year-long targets for its revenue, earnings, expenses and so on.
At the end of each quarter, the company will let shareholders know how much money they made or lost and whether or not they’re on track to meet all of their targets. At the end of Q4. companies will announce if they met their targets and how they want to approach the next fiscal year.
These reports are important because if a public company meets or exceeds their targets, their stocks could become more valuable. This is because investors will see this as a sign that the company is stable.
Fiscal Quarter vs. Calendar Quarter
Some companies follow the natural quarters of the calendar mentioned above. This is known as a calendar quarter or year. Some might create their own fiscal calendar.
This could be to better align with when they pay their taxes or if the product they sell has a strong busy or slow season.
Retailers who often see their best quarters during the winter holidays might end their year in September like Apple or at the end of January like Target.
Schools often align their fiscal year with the school year and report their earnings in June.
If you want to deviate from the calendar year, you’ll have to work with your accountant and the IRS to decide when you’ll be closing your financial books and paying taxes.
Common Terms Related to Fiscal Quarters
If you keep up with market news, you probably have heard a few of these terms:
- Earnings Report: This is like the company’s report card. Each quarter, they will announce their profits, losses and where they’re spending their money.
- Quarterly Earnings Call: This is the way many companies share and give context to their earnings reports. For publicly traded companies, these calls or a summation of what happened on the call are often posted publicly and picked up by the media.
- Fiscal Year End (FYE): Like the name suggests, this is when the fiscal year ends.
- Guidance and Forecasting: This when the company lets shareholders know how they see themselves performing in the future. This could mean announcing that they expect to miss their targets in the next quarter.
The Bottom Line
Quarterly reports are an essential part of running a company. Publicly traded companies are required to report earnings and company news to investors, but even nonpublic companies typically create quarterly reports so they can monitor the health of their businesses.
As an investor, it’s important to pay attention to when companies you invest in provide their quarterly reports, as they can affect the value of your stock, sometimes dramatically. As some companies use calendar-year reporting and others use fiscal years instead, it’s important to know when to expect these reports.
FAQ
- What happens if a company has a bad quarter?
- For a publicly traded company, a bad quarter could mean a dip in stock price if their shareholders believe it’s a sign of more bad quarters to come. Because many media companies report on earnings reports, this could also mean a lot of publicity for the company.
- Can a company change its fiscal year?
- Yes. They’ll just have to work with their accountant to make sure the IRS knows when to expect taxes.
- How often do companies release quarterly reports?
- Every three months or four times a year.
Caitlyn Moorhead contributed to the reporting for this article.