What does TTM mean in finance?
TTM means Trailing Twelve Months. It has its shorthand and mostly used that way by analysts as trailing 12 months. This is a measurement used by companies in finance. The income statements of the company reports is used in the measurement of TTM. The company reports can be the twelve-monthly report or the provisional report.
The figure is usually calculated by the analysts as the provisional reports usually show income from the earlier months (usually three, four or nine months). TTM is the financial performance of the company for twelve month period. The financial ratios of the company can be calculated using TTM. E.g. Price / earnings is usually referred to as TTM.
Most of the financial analyst usually compare the TTM measurements against the past time frame to see how well it has increased or reduced. It also means the gain and lost data for an investment or property or even the business for the past one year or twelve months. Companies that generate a revenue of $2m in a year is a fantastic one but if the company increased the revenue to $3M, it is more fantastic.
As though most analyst reports the company earnings every four months and some three months while some is once a year, what of those that measures the revenue change daily. Some of the ones measured daily are stocks price, it is usually and very convenient to compare the previous day stock price against today’s stock price or tomorrow’s stock price.
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Lines items like property, cash and liabilities on the balance sheet, the TTM is taken from balance sheet that is the most recent that is mostly updated every four months. For this type of line on the balance sheet, the analysts take the first four month and the last four month average.
Lines items like expenses, income and revenues on the income statement, the analysts has the most recent four of the four months measurement.
The analyst makes the measurement from the financial statement in line items like dividends, expenditure and capital from the cash flow statement.
Reasons for using TTM
FULL INFORMATION: Investors usually want latest information. When the financial statement for the year end is prepared, it usually take more than two or three months for the actual statement to get finalized. If the statement for the year end reflects the figures from the first of January of the preceding year is to be taken into account, the financial statement of the company can be built on the figures which are up to 15 months old at the time of the release. With this, the financial ratios like price / earnings and earnings / the rate of growth are out. Investors know they are looking at latest information about the account just by looking at the ratios that were generated from the TTM.
Very effective: TTM is the most effective method of analyzing the most recent financial information in an annualized arrangement. Data that is annualized helps to avoid and cancel out any abnormalities in the financial results.