EBITDA Calculator
Calculate EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and EBITDA margin. Essential for business valuation and financial analysis.
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What is EBITDA?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It's a measure of a company's operating performance that removes the effects of financing and accounting decisions, providing a clearer view of operational profitability.
EBITDA is widely used in business valuation, financial analysis, and comparing companies across different industries because it focuses on operational efficiency rather than capital structure or tax strategies.
How to Use the EBITDA Calculator
- Enter revenue: Input your total revenue or sales.
- Enter operating expenses: Input all operating expenses (excluding interest, taxes, depreciation, and amortization).
- Enter depreciation (optional): Input depreciation expenses if available.
- Enter amortization (optional): Input amortization expenses if available.
- Calculate: Click "Calculate EBITDA" to see your EBITDA and EBITDA margin.
Understanding EBITDA
What EBITDA Shows
EBITDA shows how much cash a business generates from its operations, ignoring how it's financed, tax rates, and non-cash expenses like depreciation.
EBITDA Margin
EBITDA Margin = (EBITDA / Revenue) × 100. This shows what percentage of revenue becomes EBITDA, indicating operational efficiency.
Why Use EBITDA?
EBITDA allows comparison of companies with different capital structures, tax situations, and depreciation methods. It's commonly used in business valuations and M&A transactions.
Limitations
EBITDA ignores working capital needs, capital expenditures, and debt obligations. It's not a measure of cash flow and shouldn't be the only metric used for analysis.
Frequently Asked Questions
What's a good EBITDA margin?
EBITDA margins vary by industry. Generally, 10-15% is considered good, though software companies may have 30-40% margins while manufacturing might have 5-10% margins.
How is EBITDA different from net profit?
EBITDA excludes interest, taxes, depreciation, and amortization, while net profit includes all expenses. EBITDA is typically higher than net profit and focuses on operational performance.
Why do investors use EBITDA?
Investors use EBITDA to compare companies' operational efficiency without the impact of different financing structures, tax rates, and accounting methods. It's useful for valuation multiples.
Is EBITDA the same as cash flow?
No, EBITDA is not cash flow. It doesn't account for changes in working capital, capital expenditures, or actual cash payments. Free cash flow is a better measure of actual cash generation.
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