While reading financial statements like profit and loss, or revenue, you might encounter some of these terms. Let’s understand what they mean.
Revenue
Anil has a shop that sells samosas. He sells 100 samosas a day at 10 rs per samosa. How much money does he make from sales? 100 *10 = 1000 rs.
The total money that a company makes is called its revenue.
Quarter
How many months does a year have? 12. These 12 months are divided into 4 quarters (qua means 4) of 3 months each. This is purely for convenience.
Since the financial year is typically from April – March in India, for India, the quarters are: Jan-Feb-March (JFM), April-May-June (AMJ), July-August-September (JAS), October-Nov-Dec(OND).
Y-on-Y
Y-o-Y or Y-On-Y simply means Year on Year.
Let’s go back to Anil’s Samosa shop. If, in 2020, he sold, on average, 100 samosas a day, his annual revenue would be 1000 * 365 = 3,65,000.
Now, let’s suppose that in 2021, he sold 110 samosas on average, every day.
This makes his annual revenue 1100 * 365 = 4,01,500.
This is 10% higher than the previous year.
So, his Y-o-Y growth in revenue is 10%.
That’s all it means.
Q-on-Q
Just like year on year means over the previous year, Q-on-Q means this quarter’s earnings over the previous quarter.
Suppose Anil sells 120 samosas a day during the winter months of Jan-Feb-March. This makes his quarterly earnings 120 * (31+28+31) * 10 = 1,08,000.
Now, in April-May-June, he only sells 95 samosas a day.
This makes his revenue 95 * (30+31+30) * 10 = 86,450.
Now, his revenue this quarter is lower than last quarter, so we say that his Q-o-Q revenue has fallen (108000-86450) / 108000 *100 = 19.95% or almost 20%.
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