How well do you know your quarters?
Let's define quarters.
As in one-fourth in math, a quarter is three months in a company or business's fiscal year. Q1 until Q4 are legends that represent Quarter 1 to Quarter 4, respectively. Sometimes, the quarter and the year can be together as Q1 2020 or Q1/20 means the first quarter of 2020. A publicly-traded business reports its quarterly reports to the public.
Typical vs. customized
In terms of accounting, businesses usually have two main phases. One is the financial year, and the other is the financial quarter. The most typical fiscal calendar starts in January and ends in December. If this is the case, then the quarters are as follows:
- Quarter 1 - January to March
- Quarter 2 - April to June
- Quarter 3 - July to September
- Quarter 4 - October to December
Some companies follow another timeline. For example, Apple Inc.'s fiscal year ends in September, and Microsoft's is in June. Why? A company's fourth-quarter should be the strongest out of all the quarters since this affects stock price behavior. Any company has the free will to customize a fiscal year that will cater to its own needs. They need to inform the regulators. However, they cannot change this fiscal year from time to time.
Importance
Why is there a need to report financial quarters and years? They indicate financial statements that emphasize financial information during that time. Other reasons are company performance tracking, comparison, and tax purposes.
Kinds of Quarters
Quarterly Reports
Quarterly reports can immensely impact the worth of a company's stock. A great quarter means growth in stock worth. All American public-traded companies submit quarterly reports called 10-Qs and a yearly report called 10-K. Analysts, experts, and investors use these to balance their expectations.
Quarterly dividends
A dividend is the amount of share that an entity receives in a distribution. Usually, a dividend's distribution is almost always even. Let's take Microsoft's year 2016 as an example where they paid a $1.47 yearly dividend. The division goes like: $0.36 for the first three quarters and $0.39 in the fourth quarter.
There are some typical divisions that other markets beyond the US do. One is to divide their dividends equally, with one having a higher amount. Another one is paying only a single dividend for the whole year.
Non-Standard Quarters
As stated previously, some businesses and companies prefer to use a different fiscal year other than the traditional calendar fiscal year.
For example, a company that uses this non-typical strategy is Adobe. It has a financial that ends in November. And since the fourth quarter usually has the most substantial impact, some technology giants with great quarters earlier in the calendar year chose to end their financial year in the middle of the calendar year like June.
Criticism of Quarters
Some executives do not agree on having a system like quarters, saying it only produces strain and short-term outcomes rather than long-term solutions.
Even the former US President Donald Trump agreed in this opposition. He spoke to company leaders who think with the same vision of transitioning from a quarterly reporting to a semi-annual one and requested SEC to look through the issue.
Companies can report the summary of their annual statement once a year
and use TTM or trailing 12 months analysis to avoid stale information.
