EBITDA Calculator Guide

EBITDA is a key metric used to evaluate a company's operating performance and is commonly used in business valuations, especially for acquisitions and investment decisions.

How This Calculator Works

> [!IMPORTANT] > What EBITDA Measures: Earnings Before Interest, Taxes, Depreciation, and Amortization. It approximates cash-generating ability from operations, excluding financing and accounting decisions.

This calculator determines:

EBITDA - Operating profitability before non-cash charges
EBIT (Operating Income) - EBITDA minus depreciation/amortization
EBITDA Margin - EBITDA as a percentage of revenue

The Formula Path

Revenue → minus Operating Expenses = EBITDA → minus Depreciation & Amortization = EBIT (Operating Income) → minus Interest Expense = EBT (Earnings Before Tax) → minus Taxes = Net Income

Step-by-Step Example

Scenario: Small Manufacturing Business

Line Item	Amount
Revenue	$500,000
Operating Expenses	$300,000
EBITDA	$200,000
Depreciation	$25,000
Amortization	$10,000
EBIT	$165,000
Interest	$15,000
Taxes	$30,000
Net Income	$120,000

EBITDA Margin: 40% (200,000 / 500,000)

Frequently Asked Questions

Why use EBITDA instead of net income?

EBITDA removes effects of financing (interest), tax jurisdiction, and accounting choices (depreciation methods), making it easier to compare companies across different situations.

What's a good EBITDA margin?

Varies by industry. Software often sees 30%+, manufacturing 10-15%, retail 5-10%. Always compare within your industry.

How is EBITDA used in valuations?

Businesses are often valued at a multiple of EBITDA (e.g., 5x EBITDA). A company with $200,000 EBITDA at 5x would be valued at $1,000,000.

What are EBITDA's limitations?

It ignores capital expenditures needed to maintain the business, working capital needs, and debt obligations. It's not a substitute for cash flow analysis.

Key Points to Remember

EBITDA ≠ cash flow - don't confuse them
Used extensively in M&A for business valuations
Compare EBITDA margins within industries
Add back D&A to operating income to get EBITDA

Adjusted EBITDA & Valuation Bridge

Inputs

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Depreciation Calculator

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Calculated by CalcuFinance Team

Sources & References