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In financial reports, traders very often see term quarters.
What Does Quarterly Mean?
What is a business quarter?
The business quarter or financial quarter represents three months period when companies generate financial reports. Companies often divide their financial year into four quarters. There are five important facts related to quarters:
• A quarter refers to any three months taken altogether in a year.
• You can refer to quarter one as Q1, quarter two as Q2, quarter three as Q3, and Q4.
• You can refer to a particular quarter in a year by writing Q3/2021, which would mean quarter three of 2021.
• A company can release reports annually, biannually, or quarterly.
• In general, quarterly reports are essential for all the financers and analysts to understand the performance breakdown and quality assurance every three months.
In general, we all know that one year has, overall, twelve months. Some companies release their reports annually, which in general means once a year. Other companies release their reports twice a month, which is generally after every six months. These are known as biannual reports, which contribute to discussing the performance that had happened in the past six months with possible reflections for the future.
However, the company decides to release its reports after every three months a year. This is generally known as the quarterly reports and as the name suggests, having a performance report out once in three months means that the three-month trio is a quarter.
How many weeks in a quarter?
There are 13 weeks in a quarter because there are 52 weeks in the year. However, if companies measure fiscal quarters in three calendar months, it leaves out one or two day(s) a year. In that case, to compensate, one extra week is added in financial reports to every fifth or sixth year.
How many months in a quarter?
There are 3 months in a quarter because each year has 12 months and a quarter is the fourth part, so 1/4 from 12 is 3. A quarter represents one-fourth of a year, and it is usually shown as “Q1” for the first quarter, “Q2” for the second quarter, “Q3” for the second quarter, and “Q4” for the second quarter.
What fiscal quarter are we in?
In general, the year which has twelve months has four quarters. A particular abbreviation designates each quarter; for example, quarter one is written as Q1, quarter two is written as Q2, quarter three is written as Q3, and quarter four is written as Q4.
Quarters are also written in such a form that designates that it belongs to a certain year. For example, if you see Q1/21 written, you refer to quarter one of 2021. You can write different quarters with years to grasp the concept as well.
Why do you pay quarterly taxes?
US Small business owners and self-employed persons pay quarterly taxes to the IRS if their income exceeds a certain level. Usually, tax needs to be paid quarterly for the following reasons:
- If the estimated tax due is $1,000 or more
- You owed 90% of your estimated tax owed for the current year
- You owed 100% of the tax amount of your return for the prior year
Why are quarterly reports important to shareholders?
A dividend payment which is the redistribution of the earnings that a company makes to its esteemed holders or workers, is usually analyzed every quarter. Reporting that entails how the company had performed and whether it has been meeting its targets or not is normally done every three months. This is why quarters are quite crucial for a business or a company that is working on investments. It is also common that the quarters that the company writes down are not in line with how the calendar months are. It can differ from the calendar months as well. For example, quarter one of a company may begin from the fourth month of the calendar, April, and last till June, which would become Q1. This is a point that needs to be understood instead of just assuming, as it can mess up deadlines.
Many companies, however, work through the quarters as given by the calendar. Usually, the last quarter of any company, the Q4, is when many analyses and reports are being written and presented. It is therefore regarded as one of the busiest times of the year. When the companies have completed the reports of the fourth quarter, they usually end-all of the reports. This is generally known as the closing of the year. Many people’s livelihoods depend on how well they performed and were analyzed around the last quarter of the year.
When we speak about the companies, there are generally two types of terms that are used widely. One is known as the fiscal year, and the other is the fiscal quarter. A fiscal year refers to a whole year. Although it can differ from the calendar in terms of not necessarily starting in January, most companies adhere to the conventional calendar practice and begin the fiscal year in January that runs till December 31.
However, fiscal quarters refer to four quarters as discussed, and mostly they have adhered with the calendar. In this term, you can see that the quarters are as follows:
1. January, February, March- Quarter One- Q1
2. April, May, June- Quarter Two-Q2
3. July, August, September- Quarter Three- Q3
4. October, November, December- Quarter Four- Q4
It is important to understand that a fiscal quarter is aligned or in line with the fiscal year.
Quarter dates are:
- 1 January – 31 March. The beginning of quarter one is January 1. The end of q1 is 31 March. Q1 duration is 90 days or 91 days in leap years.
- 1 April – 30 June. The beginning of quarter two is April 1. The end of Q2 is 30 Jun. Q2 duration is 91 days.
- 1 July – 30 September. The beginning of quarter three is July 1. The end of q3 is 30 September. Q3 duration is 92 days.
- 1 October – 31 December. The beginning of quarter four is October 1. The end of q4 is 31 December. Q4 duration is 92 days.
How a quarter of each company differs from one another?
It is pertinent to note that a company’s performance in one quarter is not identical to its previous quarters. Many companies have a practice of putting down the same quarter report as it was in the previous year. This is misleading as the performance may change in the following year. Furthermore, the quarters of different companies may mean different things. For example, it is never a hard and fast rule that quarter one would be the busiest and quarter two and three would be slow for every company. A company that works on seasonal supplies and works during the festival period such as Halloween or Christmas may have a productive and fruitful quarter-four; however, an automobile company may yield good results at the beginning of the year, which means that their quarter one and quarter two would be productive. Similarly, a company can have a slow quarter in the beginning and a busy one in the latter part of the year. All of this cannot be predicted and cannot be pinpointed as well. A department store may have differences in the year when they compare their quarterly reports, and this is because other things come into play. For example, their sales may be affected by the inflation rate, market prices, value for the product, and quality.
Therefore, we need you to understand that no one rule fits all situations when quarters are being spoken about. They may differ depending on how the situation fares each year, and thus, any comparison is made may be misleading.
Different types of quarters
There are different types of quarters which include them in the form of reports and dividends as well. We will discuss both of these types in this section. Firstly let us discuss what the reports released in one quarter are:
The reports released after every three months make for a quarterly report. These reports can be according to the company’s owner’s decided quarters and may not be starting from January necessarily. Quarterly reports are important to understand the progress made by a company or a business to know whether it met its targets and what needs to be focused on more in the following quarter. This also has an impact on the shareholders and the investors. If the quarterly report is a positive one, the shares will be increased, whereas if the quarterly report is not up to the mark, it will reek negative impacts on the shares. This is important to understand in a stock market. Oftentimes, the company has met its targets, but its written reports are not convincing enough. Therefore, experienced writers are hired to write the quarterly report after every three months in most companies.
It is also important to include the aims and goals that the company will look forward to in the next three months. You should be clear about laying down realistic goals and that which are achievable as well. If there is a good explanation of goals written for the next quarter, then investors are interested in keeping an eye on you; otherwise, if the report does not interest them, then they may lose interest as well. Therefore, you should have good communication and command over the report as well.
A dividend payment which is the redistribution of the earnings that a company makes to its esteemed holders or workers, is usually analyzed every quarter. Reporting that entails how the company had performed and whether it has been meeting its targets or not is normally done every three months. This is why quarters are quite crucial for a business or a company that is working on investments. When you pay the dividends, you must be getting the trust of all the investors and making them understand that you have met your targets by the stipulated date.
Quarters differing from the conventional calendar:
The quarters of the different companies may mean different things. For example, it is never a hard and fast rule that quarter one would be the busiest, and quarter two and three would be slow for every company. The first quarter doesn’t need to start from January till March. Many companies such as Walmart start their quarter one in February, and then the cycle continues as it is. This is because each company and their dynamic differs from one another, and there is no hard and fast rule applied to the quarters. They have to consider different factors as well, such as their sales and business growth. Many companies also do not consider the starting of the month as the beginning of a quarter. They may begin with a specific date, for example, the fifteenth of a month, or like the company Adobe, they close down on the last day of November, which is 30th November. Therefore there is really no hard and fast rule that should be applied to it, and when you research about a company, you must understand and know in prior about the beginning of the quarter and end of it.
Are quarters approved by everyone?
Many companies and chief executive officers (CEOs) are of the viewpoint that the quarter system really undermines the performance of the industries. They believe that when you know you have to submit a report after every three months, you become more aware and conscious of putting things in the report, and things can be done hurriedly to put it on the paper when the report is published. This also means that the targets achieved may have a different reality, and there may be misleading facts present in the information. Many companies believe that a biannual system is the most suited one as it enhances the performance and outputs of the company. Furthermore, when you are focused on a quarterly report, it may also play to your disadvantage as you may have a product coming quarter, but due to the previous one, your interest and shares may be lost.
Thus, all of this is a play in stocks, and people have different views depending on what suits their business.
Commonly asked questions
What is the fiscal quarter?
Fiscal quarters represent four three-month accounting periods in the fiscal year in which a company reports its financial results. Quarters of the year are:
- January, February, March- Quarter One- Q1
- April, May, June- Quarter Two-Q2
- July, August, September- Quarter Three- Q3
- October, November, December- Quarter Four- Q4
Do quarters in every company go by the conventional calendar system?
The quarters of the different companies may mean different things. For example, it is never a hard and fast rule that quarter one would be the busiest and quarter two and three would be slow for every company. The first quarter doesn’t need to start from January till March. Many companies such as Walmart start their quarter one in February, and then the cycle continues as it is. This is because each company and their dynamic differs from one another, and there is no hard and fast rule applied to the quarters. They have to consider different factors as well, such as their sales and business growth. Many companies also do not consider the starting of the month as the beginning of a quarter. They may begin with a specific date, for example, the fifteenth of a month.
Is quarterly reporting recommended?
Yes, quarterly reporting is recommended as it gives you a boost as to what is needed to be done, and an overview is presented of the three months. This is easier to compile and understand as well, and based on the report, your company can find some good investors.