What does Last Twelve Months (LTM) mean and why is it important?

Revolut Contributor

 · 06/25/2020  · 06/25/2020

Last twelve months (LTM) simply refers to the preceding twelve months of financial data up to the date being reported on. In finance, this will typically be used to evaluate a company’s past performance for the most recent year. Unlike a company’s financial year, which will run each year to a fixed date (such as 31 March), LTM can be reported on across any twelve-month period.

Why is Last Twelve Months (LTM) important?

The last twelve months of trade are often the most important to review for business owners as it is the most recent financial information available. Particularly in sales-driven industries, it can be extremely valuable to be able to compare year on year revenue. LTM can be used with any financial metric, including revenue, profit, or trade debtors, just to name a few.

How can Last Twelve Months (LTM) be used?

Modern accountancy software often can create custom reports that financial managers and accountants can use to their advantage. LTM is one of the many custom reports that could be created in line with any financial metric that a business wishes to track. An example of this could be tracking the last twelve months of sales of a new product line to assess performance.

Why should businesses be using it?

By reviewing the most recent twelve-month period, you are evaluating performance with the most up to date information, which allows business owners to make well-informed decisions based on this data. Combining LTM with specific metrics chosen in line with a company’s goals will create valuable reports that provide information key to a company’s success.

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About the author

Harrison Osborne is an Assistant Manager at Haines Watts and operates across both the Aylesbury and Berkhamsted offices. Harrison recently qualified as a Chartered Accountant (ACCA) back in January 2020. Harrison assists a range of clients with the preparation of their statutory accounts, corporation tax, VAT, and management accounts. He also prides himself on his ability with cloud accounting software which he frequently trains clients and colleagues on.