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Financial Highlights

Moneyzine Editor
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Moneyzine Editor
2 mins
January 18th, 2024
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Financial Highlights

Definition

The term financial highlights refers to a section appearing in an annual report that includes a multi-year comparison of operating and business metrics. Financial highlights are oftentimes the first section appearing in an annual report, providing investors with an at-a-glance view of the company's recent performance.

Explanation

Rules under the jurisdiction of the Securities and Exchange Commission require companies to send an annual report to shareholders prior to meetings held to elect members to their Board of Directors. Companies typically combine their annual reports with their Form 10-K and definitive proxy statement and distribute these materials to shareholders approximately forty days prior to these meetings.

The information contained in an annual report is normally audited by the company's accounting firm and includes financial highlights, a Chairperson's Letter as well as the Form 10-K. The financial highlights section of the report usually contains performance over the last several years in addition to the percentage change in each metric over time.

The information in this section can be in the form of a table or graphical displays of the data. The exact information provided may vary between industries, but will usually include the following:

  • Sales / Revenues

  • Operating Profit / Net Income / Income from Continuing Operations

  • Free Cash Flow / Operating Cash Flow

  • Earnings per Share / Dividends per Share

  • Return on Equity / Return on Invested Capital / Return on Assets

  • Total Assets / Total Debt

Example

The following example illustrates how a company's financial highlights might appear in their annual report:

Financial Highlights

Year 1

Year 0

% Change

Total Revenues ($M)

6,112

5,862

4.3%

Operating Profit ($M)

936

942

-0.6%

Earnings per Share

$8.42

$8.65

-2.7%

Operating Cash Flow ($M)

788

983

-19.8%

Free Cash Flow ($M)

657

772

-14.9%

Free Cash Flow per Share

$8.17

$9.65

-15.3%

Return on Invested Capital

9.1%

9.1%

0.0%

Dividends per Share

$4.50

$4.20

7.1%

Total Assets ($M)

13,151

12,547

4.8%

Related Terms

  • Balance Sheet
    Also known as a statement of financial position, the balance sheet is used to show the financial health of a company at a particular point in time. The balance sheet consists of assets, liabilities, and owner's equity in the company. It is one of the four key financial statements issued by public companies.
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  • Income Statement
    The income statement is a financial accounting report that demonstrates how net income, or profit, is derived from revenues. The main categories appearing on an income statement include revenues, cost of goods sold, operating expenses, non-recurring items and net income.
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  • Cash Flow Statement
    The cash flow statement is a financial accounting report that demonstrates how cash flows both into and out of a company. Cash flow statements provide investors and analysts with insights into the change in cash and cash equivalents in a given accounting period.
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  • Form 10-K
    The term Form 10-K refers to an annual report that summarizes the business and financial performance of a company. Form 10-K is a detailed document, which is produced by companies at the close of their fiscal year. The document contains a large number of audited financial statements that publically-traded companies are required to file with the Securities and Exchange Commission each year.
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  • Form 10-Q
    The term Form 10-Q refers to a quarterly report that summarizes the business and financial performance of a company. Form 10-Q is a detailed document, which is produced three times each year and contains a number of unaudited financial statements publicly-traded companies are required to file with the Securities and Exchange Commission.
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  • Form 8-K
    The term Form 8-K refers to a report that summarizes material events that may be of importance to the Securities and Exchange Commission or investors. The Form 8-K is used to describe a number of material events as they occur. Regulations require companies to file this report with the Securities and Exchange Commission within four days of the event.
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  • Definitive Proxy Statement
    The term proxy statement refers to a document companies provide to their shareholders outlining decisions the company will discuss at a special or annual shareholder meeting. The Securities and Exchange Commission requires companies to provide a definitive proxy statement to shareholders prior to a vote on important matters.
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  • Annual Report
    The term annual report refers to a document that summarizes the operating and financial performance of a company over the course of a year. An annual report is typically distributed to shareholders along with a definitive proxy statement approximately forty days prior to the company's annual stockholder meeting.
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  • Forward-Looking Statements
    The term forward-looking statement refers to predictions made in written materials that reference the future business or operating performance of a company. Forward-looking statements must be clearly identified by companies when communicating; allowing investors to easily distinguish between facts and speculation.
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  • The term safe harbor refers to a statutory provision or regulation that eliminates liability as long as the entity did not knowingly make false statements. Safe harbor provisions are typically associated with forward-looking statements, and will explain to users the risks associated with the use of such information.
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  • Management's Discussion and Analysis (MD&A)
    The term Management's Discussion and Analysis refers to a section of the annual report that provides investors with insights into how the business performed in the past, its current financial condition as well as projections of future performance. Management's Discussion and Analysis (MD&A) is normally included with a company's annual report or Form 10-K, allowing the investor-analyst to understand how the leaders of the business believe the company has performed over the last year and what the future may bring.
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  • Critical Accounting Estimates (CAE)
    The term critical accounting estimates refers to those assumptions and approximations that may have a material impact on the financial statements of a company due to the level of subjectivity involved in developing the estimate. The assumptions used when developing critical accounting estimates are outlined in a company's Form 10-K filing.
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