Financial highlights are a key component of corporate annual reports. These highlights present significant conclusions regarding the financial position of an organization.
Financial highlights present a one-page summary of the bottom line of the business's major financial reports, identifying the company's net present value (the dollar value of the business). Presented in brief tables, the highlights often show the current year's data alongside the same calculations for the prior year or years.
The conclusions of three primary accounting records contribute to the financial highlights: the balance sheet, income statement and cash flow. These reports and figures are calculated by accountants within the strict guidelines of Generally Accepted Accounting Principles (GAAP), which are legally enforced by the federal government to prevent fraudulent or misleading calculations and to ensure all businesses use the same accounting formulas to demonstrate their financial position.
The figures presented in the financial highlights show the company's net income (total amount earned by the company during the fiscal year), total assets, total liabilities, shareholder's equity and cash flow. The cash flow section is composed of net cash provided from operations and net cash used from finance and investments.
The summary is crucial for executives to evaluate the financial position and identify strengths and weaknesses as well as significant changes in figures from prior years. The figures become the root of the business's strategic planning. This information is not only important for financial management, but for all top management, including marketing and operations, as well as shareholders and board members.
Sources of Information
In corporations for which the information reported in financial highlights is required to be provided to shareholders and board members annually, it is the chief financial officer (CFO) who is ultimately responsible for all financial reports, including their accuracy and adherence to GAAP. Often, though, the reports are prepared by the accountant(s), who calculate figures year-round based on daily and weekly data provided by bookkeepers.