LTM EBITDA | How to Calculate Last Twelve Months EBITDA? - YouTube

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clicking the bell icon Friends today we have a topic with us that is LTM EBITDA

now what exactly this concept is all about let's try and understand this if

you see LTM EBITDA that means the last 12 months EBITDA which is you

know it is the calculation of the earnings of the company before netting

interest taxes and so-called depreciation will add over their

amortization this component for the past 12 consecutive months that's what last

LTM That means LTM that means last 12 months right and you got to know what is a

EBITDA now so LTM EBITDA important metric which

is used in valuation of business because it is more focused on you know what we

call as the operating results I mean of the of the company for the immediate

last 12 months period of time now additionally it is one of the finest

measurement tools to calculate the operating cash flows because it computes

the operating income before deducting any sort of interest depreciation

amortization considering the proper scenarios now what we need to note here

that in the LTM EBITDA is also known as TTM EBITDA now what is TTM TTM means

trailing 12 months okay now let's do an a calculation so that you know we have

some idea regarding how and what exactly is going on now I'm going to take an

example to make you understand let's have a look at another or income

statement of over here of company ABC this is company ABC is data the sales

cost of goods sold gross profit and there are some expenses which gives us a

EBITDA and there is depreciation and

amortization and then we get an operating profit over here

so let's first calculate EBITDA here if see EBITDA or Q1

Q2 Q3 and Q4 three and the EBIDTA

is $300 ,$240, $192, $154 and $123 right Q1 of 2017 that is 123

we'll try adding up + $154 that is of June 2017 +$192 that is of Q3 + $240

that gives us 708 or 9 right now that we have calculated the calendar

years EBITDA this is whole things Q1 to Q 4 those are all numbers that we added that was for 17 to

18 closey so now that we have calculated EBITDA let us calculate the last 12

months EBITDA assuming that you're calculating LTM EBITDA you know in let's

say April 2018 in so over here the LTM EBITDA are gonna be equal to a EBITDA of Q

1 of 2018 Q for 2017 Q3 of 2017 and Q to of 2017 and not the Q1 because we

want the last 12 months it us so we'll add 300+240 and 190 and 154

that gives us 886 I hope you got the exam now will understand the use of this

LTM EBITDA see TTM EBITDA is used in mergers and acquisition see the

potential buyers they prefer to value the acquisition price of the target

company based on the TTM EBITDA because that helps them to determine the actual

operating performances of the company without taking effect of its financial

or investment decision now investors they make use of what we call as a EBITDA

while calculating various valuations ratio and they compared it with other

what we call as the potential target companies and however we'll know you

know the purchase of the target company made be done at any point of time using

the previous year's EBITDA to calculate the financial ratios and it

may signify any sort of incorrect of valuations and our results to the

investor hence it is the most appropriate practice among the

technicians to calculate the LTM EBITDA by taking the financial

financial history of the last 12 months and compute the valuations ratio let's see

TTM EBIDTA analysis the TTM EBIDTA margin which is known as

see LTM a EBITDA margin or TTM EBITDA Margin refers to how much operating

cash flows the operating operating cash flow a company can generate against its

total revenue in the last 12 months so this is one of the crucial profitability

ratio which is calculated as a EBITDA or LTM EBITDA margin is equal to TTM

EBITDA divided by your total TTM that is the

trailing 12 months revenue this is the first ratio then we have the second

ratio as TTM EBITDA coverage now TTM EBITDA coverage ratio is a kind of what we

called as the solvency ratio

which defines you know how much a cash a company has generated in the last 12

months period from its operating activities to cover it to cover its

financial obligations that is you know interest lease expert expenses and it can

be calculated as the LTM it can be calculated as LTM EBITDA a coverage ratio

is equal to your TTM EBITDA + LTM lease expenses divided by LTM interest

expense plus LTM principal expenditures LTM principal repayment and plus LTM

lease expense this is went too far right these are the key financial ratios from

the point of view of investors and they can calculate the next 12 months for

the period to have a no better clarity of the company so LTM a EBITDA is also

used as the denominator in the evaluation of the target company that

what we call as the earn enterprise value divided by the LTM EBITDA okay

so we make my final conclusion on this topic now I've discussed all the

majority things with the example see LTM EBITDA simply helps us to understand

the company's core operating cash flows and now how good the company is in

managing their operating decisions however you know many companies use

metric for window dressing and their financial statement so it is always

better to consider debt capital structure or capital expenditure which

is which is known as the your capex your net income of the company while

considering the TTM EBITDA as a sole valuation I hope you have got a great

idea a clear conceptual clarity on LTM EBITDA if you have learned and

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