EBITDA Calculator

What Is EBITDA?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a widely used measure of a company’s core operating profitability, stripped of factors related to financing decisions (interest), tax environments (taxes), and accounting conventions (depreciation and amortization).

The EBITDA Formula

EBITDA = Net Income + Interest Expense + Tax Expense + Depreciation + Amortization

Or equivalently:

EBITDA = Operating Income (EBIT) + Depreciation + Amortization

Why Remove D and A?

Depreciation and amortization are non-cash charges — real accounting costs, but not cash leaving the business. By adding them back, EBITDA approximates the cash a business generates from its operations. This makes it useful for comparing companies regardless of how they finance assets (owned vs. leased) or their depreciation schedules.

EBITDA Margin

EBITDA Margin = EBITDA / Revenue × 100

The margin tells you what percentage of revenue converts to operating cash flow. Industry benchmarks vary significantly:

• Software / SaaS: 20–40%
• Healthcare: 15–25%
• Manufacturing: 10–20%
• Retail: 5–15%
• Food service / Restaurants: 8–15%

EV/EBITDA — The Valuation Multiple

EBITDA is the denominator in the Enterprise Value / EBITDA multiple, one of the most common valuation metrics in M&A and private equity. An EV/EBITDA of 8–12x is common for mid-sized companies in many sectors.

Worked Example

A company reports: Net Income = $2M, Interest = $500K, Taxes = $700K, Depreciation = $800K, Amortization = $200K, Revenue = $20M.

• EBITDA = $2M + $0.5M + $0.7M + $0.8M + $0.2M = $4.2M
• EBITDA Margin = $4.2M / $20M = 21% (Healthy)

Limitations of EBITDA

EBITDA does not account for capital expenditures (CapEx), which can be substantial in asset-heavy businesses. It also ignores working capital changes. For capital-intensive industries, Free Cash Flow is often a better metric than EBITDA.