In business, we hear about quarters quite a bit. This is a three-month period on the financial calendar of the company. It can act as a time for financial reports and pay out any dividends that may have come due.
There is more to it than that, but these financial periods are essential for showing the state of the company’s finances and paying stakeholders any due dividends.
A Better Understanding
For the most part, dividend payments and financial reporting are made every quarter. Not all companies have fiscal quarters that correspond to a traditional calendar. It is common for companies to close their fourth quarter after what is generally their busiest time.
Companies generally have two critical periods of accounting: the fiscal quarter and the fiscal years. Most companies also tend to run from January 1 through December 31, though that isn’t required.
The Fiscal Quarter
The fiscal quarter for a company is where financial results are reported. Because there are four quarters to a year, publicly traded companies would be required to issue at least four financial reports.
Most investors and companies will use fiscal quarters to track things such as business developments and financial results. You would hear the quarters referred to as Q1, Q2, Q3, and Q4.
The Pros and Cons
There are naturally good things and bad things about having quarterly reporting. The most significant advantage is allowing investors to remain informed on the critical investment decisions. Instead of waiting for an annual report, investors can look at quarterly filings to see how the business is developing over the year.
There is also a level of added transparency for regulators and journalists. There has been some argument that quarterly reporting can make investors and companies alike more focused on the short term rather than the big picture. That could drive decisions that have an impact now but may not in the near or distant future.