The TTM (Trailing Twelve Months) Income Statement is a financial statement that provides a comprehensive overview of a company’s financial performance over the past twelve months. It is a valuable tool for investors, creditors, and analysts seeking to assess the company’s profitability and evaluate its ability to generate sustainable earnings.
The TTM Income Statement, also known as the TTM P&L (Profit and Loss) Statement or TTM Statement of Operations, presents the revenue, expenses, gains, and losses incurred by a company during a specific twelve-month period. It allows stakeholders to gauge the company’s financial health and make informed decisions regarding investment, lending, and other financial activities.
Components of the TTM Income Statement typically include:
- Revenue: This section outlines the total income generated from the company’s primary operations. It incorporates sales revenue, fees, commissions, and other forms of income.
- Cost of Goods Sold (COGS): This category includes direct expenses directly attributed to the production or delivery of goods and services sold by the company. It encompasses materials, labor, and production overhead costs.
- Gross Profit: Calculated by subtracting COGS from revenue, this figure represents the company’s earnings after deducting the expenses associated with the production and delivery of goods and services.
- Operating Expenses: This section encompasses all other expenses incurred in the ordinary course of business, such as salaries, rent, utilities, marketing, research and development, and administrative costs.
- Operating Income: Also known as operating profit, this figure is derived by subtracting operating expenses from gross profit. It indicates how much profit a company makes from its core operations.
- Non-Operating Items: This category comprises gains, losses, and expenses that are unrelated to the company’s primary operations. Examples include interest income, interest expense, gains/losses from investments, and extraordinary items.
- Income Before Taxes: Obtained by adding or subtracting non-operating items from operating income, this represents the company’s earnings before taxes are applied.
- Income Tax Expense: This item reflects the amount of income tax owed based on the applicable tax laws and regulations.
- Net Income: Calculated by subtracting income tax expense from income before taxes, net income is the final figure illustrating the company’s profitability.
The TTM Income Statement provides a comprehensive understanding of a company’s financial performance over time, removing the limitations associated with a single reporting period. By considering the previous twelve months, it offers a more accurate portrayal of the company’s overall financial health and stability. Moreover, it allows for the identification of trends, patterns, and fluctuations in performance, aiding stakeholders in making more informed investment decisions.
Analyzing the TTM Income Statement can help assess a company’s profitability ratios, such as gross profit margin, operating profit margin, and net profit margin. These ratios offer insights into a company’s efficiency and its ability to generate profits from its core operations. Additionally, the TTM Income Statement facilitates comparison between different companies or industry standards, enabling investors and analysts to evaluate relative financial performance.
In conclusion, the TTM Income Statement is a vital financial statement that presents a comprehensive overview of a company’s financial performance over the past twelve months. Its detailed presentation of revenue, expenses, gains, and losses allows stakeholders to assess profitability, make informed decisions, and understand the underlying financial health and stability of a company.
