Quarter (Q1, Q2, Q3, Q4) Definition - Investopedia

A quarter refers to one-fourth of a year and is typically expressed as Q1 for the first quarter, Q2 for the second quarter, and so forth. TableofContents Expand TableofContents WhatIsaQuarter(Q1,Q2,Q3,Q4)? UnderstandingQuarters SpecialConsiderations TypesofQuarters CriticismofQuarters QuarterFAQs Business CorporateFinance&Accounting WhatIsaQuarter(Q1,Q2,Q3,Q4)? Aquarterisathree-monthperiodonacompany'sfinancialcalendarthatactsasabasisforperiodicfinancialreportsandthepayingofdividends.Aquarterreferstoone-fourthofayearandistypicallyexpressedasQ1forthefirstquarter,Q2forthesecondquarter,andsoforth.Forexample,aquarterisoftenshownwithitsrelevantyear,asinQ12021orQ121,whichrepresentsthefirstquarteroftheyear2021. KeyTakeaways Aquarterisathree-monthperiodonacompany'sfinancialcalendarthatactsasabasisforperiodicfinancialreportsandthepayingofdividends.Aquarterreferstoone-fourthofayearandistypicallyexpressedasQ1forthefirstquarter,etc.,andcanbeexpressedwiththeyear,suchasQ12021(orQ121).Quarterlyreports(knownas10-QfilingswiththeSEC)andearningsarecrucialpiecesofinformationforinvestorsandanalysts. 1:54 What'saQuarter? UnderstandingQuarters Mostfinancialreportinganddividendpaymentsaredonequarterly.Notallcompanieswillhavefiscalquartersthatcorrespondtocalendarquartersanditiscommonforacompanytoclosetheirfourthquarteraftertheirbusiesttimeofyear.DividendsarealsooftenpaidquarterlyalthoughmanycompaniesoutsidetheU.S.maynotpaydividendsevenly. Companieshavetwomain accountingperiods—thefiscalquarterandthefiscalyear(FY).ThefiscalyearformostcompaniesrunsfromJan.1toDec.31(althoughitdoesn'thaveto).Thestandardcalendarquartersthatmakeuptheyearareasfollows: January,February,andMarch(Q1)April,May,andJune(Q2)July,August,andSeptember(Q3)October,November,andDecember(Q4) Somecompanieshavefiscalyearsthatfollowdifferentdates.CostcoWholesaleCorporation'sfiscalyearbeginsinSeptemberandendsinthefollowingAugust.Thus,itsfiscalfourth-quarterincludesJune,July,andAugust. Fiscalquartersforacompanywillcoincidewiththeirfiscalyear(FY). SpecialConsiderations Companies,investors,andanalystsusedatafromdifferentquarterstomakecomparisonsandevaluatetrends.Forexample,itiscommonforacompany’squarterlyreporttobecomparedtothesamequarterofthepreviousyear.Manycompaniesareseasonalwhichwouldmakeacomparisonoversequentialquartersmisleading. Aretailcompanycouldearnhalfitsannualprofitsinthefourthquarterwhileaconstructioncompanydoesmostofitsbusinessinthefirstthreequarters.Inthissituation,comparingthefirstquarterresultsforadepartmentstoretotheirperformanceduringthefourthquarterwouldindicateanalarmingdropinsales. Evaluatingaseasonalcompanyduringitsslowquarterscanbeenlightening.Itisreasonabletoassumethatifsalesandprofitsaregrowingintheoff-quarterswhencomparedtothesamequarterinprioryears,theintrinsicstrengthofthecompanyisalsoimproving. Forexample,autodealerstypicallyhaveaslowfirstquarterandrarelyconductincentivesalesprogramsinFebruaryandMarch.Thus,ifanautodealersawsignificantimprovementinsalesinthefirstquarter,thisyearcomparedtolast,itmayindicatethepotentialforsurprisinglystrongsalesinthesecondandthirdquartersaswell. TypesofQuarters QuarterlyReports Quarterlyearningsreportsareimportantforpubliclytradedcompaniesandtheirinvestors.Eachreleasehasthepotentialtoaffectthevalueofacompany’sstock.Ifacompanyhasagoodquarter,itsstockvaluemayincrease.Ifthecompanyhasapoorquarterthevalueofitsstockcoulddropdramatically. AllpubliccompaniesintheU.S.mustfile quarterlyreports,knownas Form10-Q,withtheSecuritiesandExchangeCommission(SEC)attheendoftheirfirstthreefiscalquarters.Each10-Qincludesunauditedfinancialstatementsandoperationsinformationforthepreviousthreemonths(quarter). Apublicly-tradedcompanymustalsofileanannualreport,knownasForm10-K.Theannualreportwilloftenincludemoredetailedinformationthanthequarterlyreportsincludinganauditstatement,presentations,andadditionaldisclosures. Thequarterlyearningsreportoftenincludesforward-looking“guidance”forwhatmanagementexpectsfromthenextfewquartersorthroughtheendoftheyear.Theseestimatesareusedbyanalystsandinvestorstodeveloptheirexpectationsforperformanceoverthenextfewquarters. Theestimatesandguidanceprovidedbyanalystsandmanagementcanhaveabigimpactonastockeverythreemonths.Ifmanagementissuesguidanceforthenextquarterthatisworsethanexpected,thestock’spricewilldrop.Similarly,ifmanagementissuesguidance—orananalystupgradetheirindependentestimates—thestockcanrisesignificantly. QuarterlyDividends IntheU.S.,mostcompaniesthatpayadividendwilldistributeitmoreorlessevenlyoverfourquarters.InmanyeconomiesoutsidetheU.S.,itiscommontosplittheannualdividendintoquarterlypaymentswithoneofthepaymentsbeingmuchlargerthantheothers.ItisalsonotunusualtofindcompaniesoutsidetheU.S.thatonlypayonedividendperyear. Thepaymentofquarterlydividendscancreatesomevolatilityinastock'spricewhentheex-datearrives.Someanalystshavenoticedthatinvestorsmayrebalanceorselltheirstockontheex-dateorsoonafterwhenthedividendgrowthrateappearstobeslowingorotherchangesinthemarketmakethedividendlessattractive. Non-StandardQuarters Foravarietyofreasons,somepubliccompanieswilluseanon-standardornon-calendarquarterlyreportingsystem.Inaddition,certaingovernmentsusedifferentquartersystems.ThefirstquarteroftheU.S.federalgovernment’sfiscalyearisOctober,November,andDecember.Stategovernmentsmayalsohavetheirownfiscalcalendars. Sometimesacompanymayhaveanon-standardfiscalyeartohelpwithbusinessortaxplanning.TheInternalRevenueService(IRS)allowscompaniestochoosea“taxyear”thatisstill52-53weekslongbutdoesnotendinDecember. H&RBlock(HRB)endsitsfiscalyearonApril30th,whichmakessensebecausethatistheendofthebusiestpartofthecompany’syear. Releasinganannualreport,whichmaybeaccompaniedbyshareholdermeetingsandadditionaldisclosures,afterthebusiestpartofyouryearhelpsmanagersandshareholdersmakebetterdecisionsabouttheyearahead. CompaniesthatrelyonU.S.governmentcontractsmayuseSeptemberastheendoftheirfiscalyear,andthefourthquarterbecausethatiswhentheyexpectnewprojectstobeclosedandbudgetplanningfromthegovernmenttobeavailable.Meanwhile,somecompanieshaveveryunusualquarterlysystems. CriticismofQuarters Somehavequestionedtheimportanceofthequarterlyreportingsystem.Thebigargumentagainstthesetupisthatitputstoomuchpressureoncompaniesandexecutivestodelivershort-termresultstopleaseanalystsandinvestorsasopposedtofocusingonthelong-terminterestsofthebusiness. Theotherissueisthatcompaniesreporttheirsummaryannualstatementsonceperyear,sotheinformationcanbecomestaleandoutofdateinbetweentheannualreportingcycle.Oneapproachtosolvethisproblemistouseatrailingfourquartersortrailing12months(TTM)analysis. Bythemiddleofthefourthquarterof2021,theannualdatafor2021canbeestimatedbysummarizingthelastfourquarters.Inthiscase,assumethatthecompany’sthird-quarter2021resultsareavailable.Ananalystwouldmanuallycombinethequarterlydatafromthefirstthreequartersof2021withthelastquarterof2020toestimatethecompany’searningsandrevenuetrends. Thisanalysiswilloverlapsomeofthedatausedinthelastannualreport,butitwillstillgivesomeinsightintohow2021islikelytolookbytheendoftheyear.Ifthefirstthreequartersof2021hadbeenpoorcomparedtothefirstthree-quartersof2020,thetrailing-four-quarteranalysiswillshowthat. Giventhattherearesomanyvariablesthathavetobeaccountedforwitheachnewquarter,utilizingthebestaccountingsoftwareisagreatwaytohelpaccountssavetimeandensureallreportingisaccurate. WhatIsaFiscalQuarter? Afiscalquarterisathree-monthperiodinwhichacompanyreportsitsfinancialresults.Asitsnamesuggests,therearefourquarterlyperiodsinayear,meaningapublicly-tradedcompanywouldissuefourquarterlyreportsperyear.Companiesandinvestorsalikeusefiscalquarterstokeeptrackoftheirfinancialresultsandbusinessdevelopmentsovertime.ThesequartersareoftenreferredtoasQ1,Q2,Q3,andQ4. AreQuartersAlwaysLinedUptotheCalendarYear? Quartersdonotalwayslineupwiththecalendaryear.Forinstance,ifacompanychoosestohaveitsfiscalyearstartinginFebruaryratherthanJanuary,thenitsfirstquarterwouldconsistofFebruary,March,andApril.Companiessometimeschoosetodothisiftheywanttheirfiscalyeartoendintheirownpeakseason. Alternatively,sincefinishingtheyearofteninvolvesalotofadditionalaccountingwork,somecompanieschoosetoendtheirfiscalyearonarelativelycalmmonth. WhatAretheProsandConsofQuarterlyReporting? Themainadvantageofquarterlyreportingisthatitallowsinvestorsmoreinformationonwhichtobasetheirinvestmentdecisions.Ratherthanwaitinguntilacompanyfilesitsannualreport,investorscanreadtheirquarterlyfilingstogetasenseofhowthebusinessisprogressingthroughouttheyear.Thisaddedtransparencyalsobenefitsjournalistsandregulators.Somehaveargued,however,thatquarterlyreportingmakescompaniesandinvestorsmoreorientedtowardshort-termresults. ArticleSources Investopediarequireswriterstouseprimarysourcestosupporttheirwork.Theseincludewhitepapers,governmentdata,originalreporting,andinterviewswithindustryexperts.Wealsoreferenceoriginalresearchfromotherreputablepublisherswhereappropriate.Youcanlearnmoreaboutthestandardswefollowinproducingaccurate,unbiasedcontentinour editorialpolicy. CostcoWholesale."2021AnnualReport,"Page19.AccessedDec.31,2021. U.S.SecuritiesandExchangeCommission."HowtoReada10-K/10-Q."AccessedDec.31,2021. USA.gov."BudgetoftheU.S.Government."AccessedDec.31,2021. InternalRevenueService."TaxYears."AccessedDec.31,2021. H&RBlock."H&RBlockReportsStrongFiscal2021Results;IncreasesDividend."AccessedDec.31,2021. CompareAccounts AdvertiserDisclosure × TheoffersthatappearinthistablearefrompartnershipsfromwhichInvestopediareceivescompensation.Thiscompensationmayimpacthowandwherelistingsappear.Investopediadoesnotincludealloffersavailableinthemarketplace. Provider Name Description RelatedTerms MJSD MJSDisanacronymrepresentingMarch,June,September,andDecember—thefinalmonthsoftheirrespectivefinancialquarters. more WhatYouShouldKnowAbout10-Ks A10-Kisacomprehensivereportfiledannuallybyapublicly-tradedcompanyaboutitsfinancialperformanceandisrequiredbytheU.S.SecuritiesandExchangeCommission(SEC). more MostRecentQuarter(MRQ) MostRecentQuarter(MRQ)referstothemostrecentlycompletedfiscalquarterwithitsfiguresusedtodescribechangesincompanyperformance. more WhatIsTrailingEarningsPerShare(EPS) Trailingearningspershare(EPS)isthesumofacompany'searningspershareforthepreviousfourquarters. more WhatIsSECForm10-Q? LearnaboutSECForm10-Q,acomprehensivereportofacompany'sperformancesubmittedquarterlybyallpubliccompaniestotheSEC. more EarningsSeason Earningsseasonreferstothemonthsoftheyearduringwhichmostquarterlycorporateearningsarereleasedtothepublic. more PartnerLinks RelatedArticles EarningsReportsandNews MicrosoftEarnings:WhattoLookFor EarningsReportsandNews Block(Square)Earnings:WhattoLookFor EarningsReportsandNews RobinhoodEarnings:WhattoLookFor BusinessEssentials WhenDoesQ4StartandFinish? EarningsReportsandNews VirginGalacticEarnings:WhattoLookFor EarningsReportsandNews ExxonMobilEarnings:WhattoLookFor