EBITDA calculator

EBITDA stands for earnings before interest, taxes, depreciation and amortization. It estimates the profit a business makes from its operations, before the effects of how it is financed, where it pays tax and how its assets are accounted for. That makes it easier to compare companies with each other.

EBITDA = Net income + Taxes + Interest + Depreciation and amortization

EBITDA = Revenue − Cost of goods sold − Operating expenses

Both give the same result. In the second, operating expenses must exclude depreciation and amortization.

A company has a net income of 75.000, after 25.000 of taxes, 30.000 of interest and 50.000 of depreciation. Adding them back gives an EBITDA of 180.000. On revenue of 1.000.000, the EBITDA margin is 18 %.

Adjusted EBITDA removes items that are not expected to repeat, such as a legal settlement or restructuring costs. Buyers and lenders use it to see the normal earning power of a business, and they usually challenge each adjustment, so keep the list short and easy to evidence.

EBITDA margin = EBITDA / Revenue

The margin shows how much of each unit of sales turns into operating profit. It is most useful against companies in the same sector, since typical margins vary widely from one industry to another.

EBITDA is not cash. It ignores capital spending, changes in working capital, interest and tax, all of which use real money. A company with strong EBITDA can still run short of cash, so look at free cash flow as well.