Understanding Stock Market Quarters

Understanding Stock Market Quarters
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Companies listed on the stock market, known as public companies, must report their financial status on a regular basis, as required by the U.S. Securities and Exchange Commission. In addition to an annual financial report, companies also file quarterly reports. Shareholders and potential investors rely on a company's financial reports to understand the fiscal health of the company and make well-informed investment decisions. Because many companies post earnings reports on a similar schedule, the stock market's annual calendar is divided into four quarterly periods known as earnings seasons.

Fiscal Years

A public company establishes an annual reporting schedule based on its fiscal year. The fiscal year is a 12-month period established for financial accounting purposes. It may or may not coincide with the calendar year. For example, the fiscal year for General Motors begins on Jan. 1 and ends on Dec.31, but the fiscal year for the federal government begins on Oct.1 and ends on Sept. 30 in the following calendar year. A company releases its annual financial report at the end of each fiscal year.

Quarterly Reports

Under the Securities Exchange Act of 1934, public companies are required to file quarterly financial reports with the U.S. Securities and Exchange Commission. These reports, known as 10-Q reports, provide a detailed accounting of a company's financial results for the most recent quarter of its operations. A 10-Q report includes financial statements, an assessment of business risks, a description of significant legal proceedings with which the company is involved, management's discussion and analysis of business operations and descriptions of other major financial transactions.

Earnings Seasons

The stock market is divided into four quarterly earnings seasons that coincide with the quarterly report postings from companies that use the calendar year as their fiscal year. Earnings seasons begin each January, April, July and October, as these are the months immediately following the end of the previous quarter and the time during which quarterly reports are made public. Investors often rely on the earnings season reports from major companies as an indicator of the overall economic health a particular industry sector.

Private Companies

Private companies that are not traded on the stock market are not required to file publicly available quarterly reports. Generally accepted accounting principles, however, usually call for private companies to follow similar annual and quarterly reporting cycles so that a company's private shareholders and investors can gauge the financial status of the firm. Private companies may also make their annual and quarterly financial reports publicly available even though they are not required to do so. For example, Cargill, one of the largest private companies in the United States, releases a summary of its financial information every quarter.