What Is a Fiscal Year?

By Jeremy Bowman – Updated Feb 26, 2025 at 2:22 PM EST

Key Points

Fiscal years differ from calendar years, allowing businesses to choose optimal reporting periods.
Companies adjust fiscal year ends to align with business seasonality, aiding financial reporting.
Investors should note fiscal year timings for accurate company performance comparisons.

Every business or organization must record financial statements to keep track of expenses, report profits and losses, and maintain a balance sheet. Of course, these statements and reports occur at predetermined periods, typically known as fiscal years or fiscal quarters. A fiscal year may sound like a simple concept, but there's more you should know.

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A stand-up monthly desk calendar with fluttering pages. — Image source: Getty Images.

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However, some companies are exposed to seasonality. In the retail industry, for example, sales tend to spike in December due to the holiday shopping season. That creates another challenge for retailers because they are often inundated with returns after Christmas.

If their fiscal year ended on Dec. 31, that complicates their financial reporting. So, most retailers end their fiscal year at the end of January to avoid any confusion related to holiday sales and returns. The end of January also typically marks one of the slowest times of the year for retailers, and businesses typically end their fiscal year during slow periods.

Another example of businesses that use alternative fiscal years is vacation-related or outdoor-related businesses, such as lawn care, since they're subject to their own seasonality. Academic institutions will also use fiscal years that track with the school year, and businesses will use fiscal years that track with students. Even the federal government uses an alternative fiscal year, which ends on Sept. 30.

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, Vail Resorts, and Walmart. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.