In this installment of "Ask a Fool," Fool contributor Steve Heller takes a question from Fool reader Joshua Geldert, who writes:

Are there specific guidelines for companies when they issue guidance for the quarter or year? For example, the media constantly states that Apple (NASDAQ:AAPL) low-balls their guidance. How do they come up with this number in the first place? Are there specific guidelines for analysts as well, which is the reason why analysts are wrong the majority of the time?

In the following video, Steve goes on to explain how Apple issues its own guidance by looking internally and making projections based on previous results while also factoring in new products and variables. On the analyst side, a similar exercise is preformed, but the difference is that analysts don't have access to all the intricacies of Apple's books, leaving more of the estimation up to assumptions that could go awry. In the end, Steve gives Apple investors some advice on how to think its performance in a much simpler way than measuring its performance against its earnings guidance.

1 must-own stock in 2014
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Steve Heller owns shares of Apple. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.