What is meant by the term "fiscal year"?

The term "fiscal year" refers to a one-year period used for financial reporting and budgeting. This time frame does not necessarily align with the calendar year, which runs from January 1 to December 31. Instead, organizations can choose any 12-month period that best suits their operational and financial cycles for reporting purposes. This choice allows businesses to assess their income and expenditure and report their financial performance accurately, facilitating effective planning and management.

Organizations often align their fiscal year with specific business cycles, seasonal sales patterns, or regulatory requirements, which can differ from one organization to another. By designating a specific fiscal year, companies can maintain consistency in their financial records and audits over time, making it easier to compare performance across multiple years.

The other potential options do not accurately capture the definition of a fiscal year. For instance, while measuring employee performance may occur annually, it is not specifically tied to the financial reporting aspect, which is the core of the fiscal year. Similarly, the option describing any duration of 12 months for planning is too broad and does not specifically relate to financial frameworks. Lastly, specifying the period from March 1 to February 28 is only an example of a fiscal year and does not represent the general definition applicable to all organizations