A fiscal year operates on a budget laid out by a business to calculate current expenses and revenues throughout a period of time. Each fiscal year consists of four fiscal quarters. Unlike a standard year that operates from January to December, fiscal years generally begin in the middle of the calendar year due to the busy holidays at the end of a regular year. This allows them to end during the middle of the following year and have appropriate time to wrap up paperwork, inventories and other necessities.
Type of Business
Fiscal years and quarters occur most commonly within companies that publicly trade. These companies are public companies that sell stock or bonds to investors in order to receive capital to maintain the business. In some instances, stocks, bonds or other securities compensate employees in lieu of wages.
Fiscal years typically span two calendar years. For example, the U.S. government operates on a fiscal year that begins on October 1 and runs until September 30 of the following year. A fiscal year is comprised of four fiscal quarters, each composing of three fiscal months. On a fiscal year going from October 1 to September 30, fiscal quarters of that year would be from October 1 to December 31, January 1 to March 30, April 1 to June 30, and July 1 to September 30.
The main purpose of a fiscal quarter is to provide current and potential investors with financial information concerning the company. Each fiscal quarter, a public company is required to release Form 10-Q, which shows the company’s financial statements, mergers and splitting of stock. The Securities and Exchange Commission provides this information to investors within 45 days of the fiscal quarter ending.
These reports allow current and potential investors to see the growth or decline of the financial aspect of a business. Many investors are able to predict how well the company will do in the future or determine if they are still interested in owning stock in the company. Depending on the future prediction of the success of the company, the price of the shares of stock may fluctuate accordingly.