What is a fiscal year?

A fiscal year is defined as a one-year period that organizations use for financial reporting and budgeting purposes. This period does not necessarily align with the calendar year, which runs from January 1st to December 31st. Instead, an organization can choose any start and end date for its fiscal year based on its operational needs or industry practices.

For example, a retail company might choose to end its fiscal year after the holiday season to better assess its annual performance. This flexibility allows businesses and organizations to align their reporting periods with their unique cycles of revenue and expenses.

In contrast, the other options refer to different concepts. A calendar year strictly follows the January to December timeline, while a two-year budget cycle applies primarily to government organizations that plan budgets over two years for stability and continuity. The quarterly reporting period refers to financial reports that are prepared every three months, which is common for many public corporations to provide more frequent updates on performance but does not define a fiscal year.