On a company’s financial calendar, a quarter is a three-month period that serves as the foundation for quarterly financial reports and dividend payments.
The majority of financial reporting and dividend payments occur quarterly. Not all companies’ fiscal quarters match the calendar quarters, and it’s customary for businesses to complete their fourth quarter after their busiest season.
The fiscal quarter and the fiscal year are the two primary accounting periods for businesses. Most businesses’ fiscal years span from January 1 to December 31 (though it does not have to). The following are the traditional calendar quarters that make up the year:
– January, February, and March (Q1)
– April, May, and June (Q2)
– July, August, and September (Q3)
– October, November, and December (Q4)
Companies, investors, and analysts compare and assess trends using data from multiple quarters. A company’s quarterly report, for example, is frequently compared to the same quarter of the prior year. Many businesses are seasonal, making a comparison of quarterly results deceptive.
For publicly listed corporations and their investors, quarterly earnings reports are critical. Each press release has the power to influence the stock price of a company. A company’s stock value may rise if it has a strong quarter. The value of the company’s shares might plummet if the company experiences a bad quarter.
After their first three fiscal quarters, all public corporations in the United States must file quarterly filings with the SEC, known as Form 10-Q. The prior three months’ unaudited financial statements and operating data are included in each 10-Q.
An annual report, known as Form 10-K, is also required of a publicly traded corporation. An audited statement, presentations, and additional disclosures are frequently included in annual reports that are more extensive than quarterly reports.
Forward-looking “guidance” for the following several quarters or through the end of the year is frequently included in quarterly earnings reports. Analysts and investors use these estimates to forecast performance over the next several quarters.
In the United States, most corporations that pay a dividend will spread it out across four quarters. It is common in many economies outside of the United States to divide the yearly dividend into quarterly installments, with one payment being significantly bigger than the rest.
When it comes to quarterly dividends, the ex-date might cause considerable volatility in a stock’s price.
Some public corporations will adopt a non-standard or non-calendar quarterly reporting structure for a variety of reasons.
A corporation may use a non-traditional fiscal year to aid in business or tax planning. According to the IRS, companies can pick a “tax year” that is still 52–53 weeks long but does not finish in December.
The significance of the quarterly reporting method has been questioned by some. The main criticism of the system is that it places too much pressure on companies and executives to generate short-term outcomes to impress analysts and investors, rather than focusing on the business’s long-term objectives.
Another difficulty is that corporations only publish their summary annual statements once a year, causing the data to grow stale and out of date in the meantime.
What is a Fiscal Quarter?
A fiscal quarter is a three-month period during which a company’s financial performance is reported. A year is divided into four quarters, as the name indicates, and a publicly listed company would produce four quarterly reports every year.
Fiscal quarters are used by both companies and investors to keep track of their financial outcomes and company changes throughout time.
Are Quarters always lined up with the calendar year?
The calendar year may not necessarily correspond to the quarters. For example, if a corporation decides to start its fiscal year in February rather than January, the first quarter will be February, March, and April. Companies may do so if they want their fiscal year to conclude during their peak season.
What are the pros and cons of Quarterly Reporting?
The major benefit of quarterly reporting is that it provides investors with more data on which to make investment decisions. Investors might examine a company’s quarterly filings instead of waiting for its annual report to get a feel of how the company is doing throughout the year.
However, some say that quarterly reporting causes organizations and investors to be more focused on short-term success.