What does the term 'fiscal year' refer to?

The term 'fiscal year' refers to a one-year period that companies use for financial reporting and budgeting. This period does not necessarily align with the calendar year and can vary from one company to another. Businesses may choose their fiscal year based on cycles relevant to their operations, industry standards, or seasonal patterns. For example, a company may select a fiscal year that ends in June, allowing it to prepare annual financial statements and budgets aligned with its business cycle.

Although other options mention periods related to financial operations, they do not capture the full scope of what a fiscal year means. A three-month period used for tax calculations is more representative of a quarterly reporting period, while the closing of books is a process that can occur at any point during a fiscal year. Lastly, a calendar year specifically refers to the period from January 1st to December 31st, which is distinct from the broader definition of a fiscal year that companies may choose based on their unique needs.