What Are Financial Highlights?

Terry Masters

Financial highlights are a summary of the major points in a financial report. They can be included as a part of various types of reports, including corporate annual reports, mutual fund prospectuses and reports from government agencies. The report typically covers a standard time period, such as a fiscal year, and the financial information highlighted in the report can include anything noteworthy that occurred during that time.

Summaries of a financial report's important points serve as financial highlights.
Summaries of a financial report's important points serve as financial highlights.

More information than the average person can easily digest is typically included in a financial report. In the same way that a narrative report can be preceded by an executive summary, a financial report can be preceded by financial highlights. The highlights pull out the most relevant financial information from the report so the reader can get the gist of things without necessarily having to read pages for facts and figures. This summary also gives the report preparer the opportunity to call attention to the items he feels are noteworthy, focusing the reader's attention on positive results rather than letting him form his own opinion.

Financial highlights are part of a public corporation's annual report.
Financial highlights are part of a public corporation's annual report.

The most common use of financial highlights is as part of a public corporation's annual report. Public corporations are required by law to disclose financial information to shareholders and potential investors. They often do this by publishing an annual report that details the condition of the company. An annual report has a commonly accepted format that places financial highlights first in the report contents.

In a corporate context, financial highlights can include performance statistics of the company as a whole and of individual departments and products. Net cash flow can be highlighted, along with any other financial ratio or cumulative amount that is particularly noteworthy. Other matters may also be included to highlight how they impact the company's financial prospects, including acquisitions and spin-offs, joint ventures, special events and product launches.

Another common use of financial highlights involves the use of mutual funds, which must disclose historical performance statistics to potential investors. Fund managers typically prepare a fund prospectus that provides this information to the public. Financial highlights are often included at the front of the prospectus to focus the investors' attention on the best financial aspects of the fund. In practice, the highlights serve as a marketing device that allows fund managers to put the best spin on the fund's performance.

Virtually any financial report can feature financial highlights. The term is generic enough to label any summary of financial information. For example, an auditor's report can include highlights to call attention to important points. Likewise, government agencies that issue financial reports for the benefit of the public will often use highlights to summarize the most important information.

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