What is a Quarterly Report?
Quarterly reports are unaudited financial reports that are summarized versions of financial statements released by public companies every three months (quarter) to adhere to compliance requirements. These reports help in the reduction of information asymmetry and the reduction of the probability of any potential window dressing. Publicly listed companies are directed by the Securities Exchange Commission (SEC) to fill out the quarterly report form 10Q.
In this report, information pertaining to the highlights of the three months of business, executive summary, future plans, and objectives are made available to the shareholders and regulatory authorities for assessment of performance in comparison to previous quarters. Moreover, companies can also disclose the challenges they are facing and the strategies applied to tackle them.
Table of contents
- . Quarterly reports are unaudited financial summaries of financial statements issued by public businesses every three months (quarter) to fulfill compliance requirements. These reports help to eliminate information asymmetry and the risk of window dressing.
- Anyone interested in these reports can obtain them from the SEC, as the quarterly reports can be found as 10Q via the SEC’s EDGAR section.
- The quarterly reports are submitted per Article 41 of the listing agreement within 45 days after the quarter’s conclusion. It should include the current Quarter, comparable Quarter, and year-to-date numbers. In addition, it should show total gross revenue, operating expenditures, cash flow, and net profits.
How Does Quarterly Report Work?
Quarterly reports are the financial and overall performance report of a company published every three months as directed by the Securities and Exchange Commission (SEC). These reports include executive summary, performance, report, future plans, and strategies. Publicly listed companies are directed to fill a 10-Q form to declare this report on or before the quarterly report date. Let us understand how it works through the pointers below.
- These reports are filed with the Securities and exchange commission.
- These usually are unaudited reports.
- Such figures may be utilized for comparative analysis.
- It can be utilized to assess the year-to-date performance of the company.
- All publicly listed companies have to file quarterly reports with the Securities and exchange commission as a compliance requirement.
- For non-listed companies, the key stakeholders can request the release of such reports from the investor relations committee. Typically, the profit and loss statementsProfit And Loss StatementsThe profit and loss statement is a financial report that summarizes the company's revenues and expenses over a period of time to determine profit or loss for that period. are not readily available for public viewing.
- Usually, a stakeholder or an investor can access these reports from the securities and exchange commission.
- They are available as Form 10Q under the Securities and exchange commission.
- Similarly, the annual reports are available as 10K reports.
- Therefore, the investor or an analyst can visit the electronic data gathering, analysis, and retrieval systems or the EDGAR of the SEC to access the 10Q.
- They have to pass the company’s name in the search box of EDGAR.
The quarterly reports are unaudited financial statements released at every quarter-end. These reports are fairly different from annual reports. Such reports help in releasing information that helps promote investor confidence in the business. Any stakeholder keen to access these reports can download the reports from the SEC as the quarterly reports are available as 10Q under the EDGAR section of the SEC.
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Let understand the requirements for a publicly listed company while filling out the quarterly report form. While the information in the declaration varies from company to company. However, there are a certain set of requirements published by the SEC that all companies must comply with. Let us understand them through the explanation below.
- The quarterly reports are filed as per clause 41 of the listing agreement.
- The reports should be filed from the quarter-end and at the end of 45 days.
- The report should be composed of the current Quarter, comparable Quarter, and year-to-date figures.
- It should report total gross revenue, operational expensesOperational ExpensesOperating expense (OPEX) is the cost incurred in the normal course of business and does not include expenses directly related to product manufacturing or service delivery. Therefore, they are readily available in the income statement and help to determine the net profit., cash flowCash FlowCash Flow is the amount of cash or cash equivalent generated & consumed by a Company over a given period. It proves to be a prerequisite for analyzing the business’s strength, profitability, & scope for betterment. , and net profits.
Before the quarterly report date, a company must ensure all the required data is gathered and compiled in the format required by the SEC. This task is often delegated to one of the executives in coordination with a company secretary and the auditor to ensure an error-free report.
- It should cover a brief message from the board of directors Of DirectorsBoard of Directors (BOD) refers to a corporate body comprising a group of elected people who represent the interest of a company’s stockholders. The board forms the top layer of the hierarchy and focuses on ensuring that the company efficiently achieves its goals. to be shared with the stakeholders.
- They should highlight the performance of the Quarter ending financials.
- It should provide a balance sheetBalance SheetA balance sheet is one of the financial statements of a company that presents the shareholders' equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner's capital equals the total assets of the company..
- It should provide an income statementIncome StatementThe income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user requirements. and statement of cash flowsStatement Of Cash FlowsA Statement of Cash Flow is an accounting document that tracks the incoming and outgoing cash and cash equivalents from a business..
Let us understand the concept of quarterly report form and other related details with the help of a couple of examples. These examples will help us understand the intricacies of the concept.
XYZ credit agency is planning to release its quarterly report for the First Quarter. It has asked its company secretary to prepare a draft of this report. All the financial details have been shared with the XYZ credit agency. Help the company secretary to prepare this report.
Message from the board,
The board of directors has approved the release of unaudited financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels. for the Quarter ending 31/03/2019. The board feels happy to share financials with positive numbers with the stakeholders. They have taken up additional strategic initiatives that would further help improve the business’s financial conditions.
For Quarter ending 1, the balance sheet is as follows: –
|Total Current Assets||$8,200||$8,500|
|Current Portion of Debt||$2,000||$2,400|
|Total Current Liabilities||$6,700||$6,200|
|Long Term Debt||$2,000||$4,300|
|Cost of Sales||$800||$950|
In May 2023, the entertainment giant Walt Disney Co. declared their quarterly results and decided to declare their performance across different revenue streams. For instance, their losses in the streaming sector, Disney + were reduced by 26% percent by approximately $200 million.
Parallelly, their streaming platform’s subscribers shrunk by 8%. As on April 1, 2023, their global subscribers were at 157.8 million, which is reduced by 4 million in comparison to the previous quarter.
However, their overall revenue increased by 13% to $21.8 billion.
Let us understand the impact of a quarterly report date on the share price and the morale of shareholders and employees of the company through the points below.
- As per the compliance requirements of federal securities laws, publicly traded entities have to release financial informationFinancial InformationFinancial Information refers to the summarized data of monetary transactions that is helpful to investors in understanding company’s profitability, their assets, and growth prospects. Financial Data about individuals like past Months Bank Statement, Tax return receipts helps banks to understand customer’s credit quality, repayment capacity etc. annually and quarterly.
- Such disclosures help in driving transparency among different stakeholders.
- Comprehensive prepared financial statements drive accountability and help the financial markets operate efficiently.
- The release of such information at periodic intervals helps curbinformation asymmetryInformation AsymmetryAsymmetric information is the knowledge mismatch that happens when one party secures more information about a product or service than the other party to the transaction. The information failure is often seen when the seller is more informed about a product's condition than the buyer. and insider tradingInsider TradingInsider trading is defined as the act of taking key trading decisions related to a company’s listed stock using critical non-public information. The US Securities and Exchange Commission (SEC) penalizes offenders of illegal insider trading as it causes material loss to the investors. It also shakes their faith in the stock market. .
- The release of such reports helps prospective investors to decide whether they should invest in such a business or not.
- Since these reports are to be prepared in line with the compliance requirements of the federal laws, such reports are standardized and easy for laymen to understand.
- As a compliance requirement, the quarterly reports must be filed within 45 days with each quarter-end.
- It ensures that stakeholders have prompt access to crucial information, and they can easily drive critical decision-making for themselves.
- It ensures the reduction in volatility that comes into the picture of price-sensitive entities.
- Such practices enhance investor confidence and reduce the competitive disadvantages between different markets.
Let us understand the advantages of filling out the quarterly report form on time and declaring results for a publicly listed company.
- It reduces information asymmetry.
- It boosts investor confidence and hence helps in bringing additional investments to the business.
- It helps prepare the trailing twelve months, which is determined by employing two comparable quarterly statements and one recent annual financial statementAnnual Financial StatementAnnual Financial Statements refers to the annual presentation of the entity's financial performance comprising a Balance Sheet, statement of profit and loss, statement of changes in equity, cash flow statement, and notes to the financial statements. It provides information to the stakeholders for making financial decisions about the business..
- It reduces any scope of window dressingWindow DressingWindow dressing in accounting refers to the intentional manipulation of financial statements by company management in order to present a more favourable picture of the company to users of the financial statement before it is released to the public. in the financials, which is hard for annual reports. Window dressing is making year-end financial statements attractive so that they could attract new investors to the business.
- Since window dressing and information asymmetry are reduced, this results in the display of transparent financial statements.
Despite the advantages mentioned above, quarterly report dates can be a hassle or hurdle for both companies and shareholders. Let us understand the disadvantages of the report through the discussion below.
- Any activity mentioned in the quarterly reports but absent in the annual reports can impact the business’s growth prospects.
- Since these statements are not audited, they may not be easily understood by the layman.
- It isn’t easy to prepare these reports that are in line with the company’s performance objectives consistently.
- These reports are generally not standardized as compared with the annual reports.
Difference Between Quarterly Report and Annual Report
Despite the fact that both these reports declare the performance, challenges, and executive summaries of the company, there are differences fundamentally with regard to an annual report and filling out a quarterly report form. Let us understand the differences through the comparison below.
- The annual reports are reports that the business has to release to its shareholders annually.
- The quarterly reports are released quarterly.
- The annual reports would consist of auditor opinion, management discussion analysisManagement Discussion AnalysisMD&A or management discussion and analysis is the part of financial statements where the company’s management discusses the company’s current performance using qualitative and quantitative measures to realize the details that otherwise would not have been available for analysis., and the financial statements for the current financial year.
- The quarterly reports may be composed of the only year’s financial statements and quarter financials, generally unaudited. They do not have any auditor opinion or management discussion analysis.
- The annual reports are normally filed as 10K in the SEC, whereas quarterly reports are available as 10Q.
- The deadline to file annual reportsAnnual ReportsAn annual report is a document that a corporation publishes for its internal and external stakeholders to describe the company's performance, financial information, and disclosures related to its operations. Over time, these reports have become legal and regulatory requirements. is within 60 days, whereas, for interim financials, the deadline is slated as 45 days for submission.
Frequently Asked Questions (FAQs)
Earnings season often begins one or two weeks after the last month of each quarter (December, March, June, and September). As a result, most public corporations will report profits in early to mid-January, April, July, and October
Most businesses have a fiscal year that finishes on December 31, and quarters expire on March 31, June 30, September 30, and December 31. Therefore, quarterly reports are generally filed within a few weeks following the conclusion of the fiscal quarter.
SEBI (Securities and Exchange Board of India) requires every listed company to file quarterly reports to protect investors’ interests. As a result, quarterly reports permit investors to evaluate an organization’s success. It also supports making sensible decisions regarding investments.
This article has been a guide to what is a Quarterly Report. Here we explain its requirements, format, examples, advantages, and disadvantages in detail. You may learn more about financing from the following articles –