What is trailing twelve months?

Definition

Trailing twelve months adds the last twelve closed months, counted back from today rather than from a year-end. It is a span of activity, not a point-in-time balance.

On the books, it is not a separate account. The same revenue and expense that posted month by month are simply added across that window.

People often shorten it to TTM. The window slides forward as each new month closes.

Where it shows up

P&L: Related to the most recent twelve months of income and expense, regardless of fiscal year.

Balance sheet: Related to nothing extra; the span is about period activity, not a point-in-time date.

Cash flow: Related to the most recent twelve months of cash activity, regardless of fiscal year.

See also: Run Rate · Revenue · Income Statement

When you look at your Income Statement, this span is the same lines, totaled for the last twelve closed months. It may not match the year printed on the statement.

The Balance Sheet is a date, not a span. You do not put trailing twelve months on cash or accounts payable; those are balances at one day.

Cash activity can be totaled the same way. Twelve months of receipts and payments is a cash TTM, still a span rather than a bank balance.

Owners use this in packets, lender files, and internal dashboards. The Financial Statement Package still follows the reporting year; this window sits beside it.

How it works

Take the twelve months that just ended. If you are standing at the end of June, the window is last July through this June.

The window always works the same way:

• Add the last twelve closed months of actuals
• Do not annualize a recent month
• When a new month closes, the oldest month drops off so the span stays twelve months

Add the activity in that window. Do not annualize a recent month; add what actually posted.

The fiscal year can start in January, April, or any other month. This window ignores that start and always looks back twelve months.

When July closes, last July drops off and this July joins. The span stays twelve months long.

Net income and operating expenses can be totaled on the same window. Any P&L line that posted during those months can be included.

This is not a journal entry. Nothing in the general ledger changes because you added twelve months together.

A seasonal business still uses actual months, busy and slow. The window already contains a full turn of the year, so one peak month does not stand in for all twelve.

The method is the span of actual months. Multiplying one month by twelve is a different estimate.

Example

A winery's reporting year runs January through December. By the end of June, the owner also wants a current twelve-month sales picture.

Sales from last July through this June were $240,000. That is trailing twelve months, not the January–December year.

January through June of this year is only half the reporting year. The $240,000 includes the prior summer and harvest, which the year-to-date figure does not.

The books still post each month's sales as they happen. The $240,000 is a totaling of posted months, not a new account.

When July closes, last July drops out of the window and this July comes in. The new twelve-month total replaces $240,000.

Lenders and buyers often ask for this span because it is always a full year, even mid-cycle. The January–December statement remains the formal year.

Common mix-ups

Trailing twelve months is not the same as run rate. Run rate multiplies a recent slice as if it continued; this span adds the last twelve months that actually happened.

It is not the same as the fiscal year. The fiscal year is the twelve-month cycle used for annual reporting; this window can cut across two of those years.

It is not the same as year-to-date. Year-to-date starts at the fiscal-year open and grows as months pass; this window is always twelve months long.

Related terms

• Run Rate: Annualizing a recent period's results as a rough forward estimate.
• Fiscal Year: The twelve-month cycle a business uses for annual reporting.
• Revenue: The total value of goods and services the business earned in a period.
• EBITDA: Earnings before interest, taxes, depreciation, and amortization.
• Year-Over-Year Growth: The change versus the same period a year earlier.
• Forecast: An updated projection of where the numbers are actually heading.
• Income Statement: A statement showing revenue earned and expenses incurred over a period, ending in net income.
• Compound Annual Growth Rate: The smoothed average yearly growth rate across several periods.