EBITDA Calculator

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It measures a company's operating performance before financial and accounting decisions. EBITDA shows core business profitability by excluding non-operating expenses and non-cash charges.

EBITDA = Revenue - COGS - Operating Expenses (excluding D&A). Alternatively, EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization. Both methods yield the same result. It's found on the income statement or calculated from financial data.

It varies by industry. Software/SaaS: 20-40%+, Healthcare: 15-25%, Retail: 5-10%, Manufacturing: 10-15%, Restaurants: 10-15%. Higher margins indicate better operational efficiency. Compare companies within the same industry for meaningful analysis.

EBIT (Earnings Before Interest and Taxes) includes depreciation and amortization expenses, while EBITDA excludes them. EBITDA is higher than EBIT. EBIT shows operating profit after accounting for asset wear and tear. EBITDA is better for comparing companies with different capital structures.

EBITDA is used in EV/EBITDA multiples for company valuation. It allows comparison across companies regardless of capital structure (debt levels), tax rates, or depreciation methods. Common in M&A, private equity, and leveraged buyouts. Tech companies often trade at 10-20x EBITDA.

EBITDA ignores: 1) Capital expenditures needed to maintain business, 2) Working capital requirements, 3) Debt obligations, 4) Asset quality deterioration. It can mask cash flow problems. Not a GAAP measure. Warren Buffett criticizes it for ignoring real depreciation costs.

Yes, negative EBITDA means the company loses money on core operations before even considering D&A, interest, and taxes. Common in startups prioritizing growth over profitability. Indicates the business isn't operationally viable yet. Example: Revenue $10M, expenses $12M = -$2M EBITDA.

EBITDA is an accounting measure of profitability. Cash flow measures actual cash in/out. EBITDA doesn't account for: capital expenditures, working capital changes, debt payments, or timing of cash collection. Free Cash Flow (FCF) is often more accurate for valuation than EBITDA.

Adjusted EBITDA excludes one-time, irregular, or non-recurring expenses like restructuring costs, stock-based compensation, litigation settlements, or acquisition expenses. Companies use it to show "normalized" profitability. Be cautious - some companies abuse adjustments to inflate performance.

Key ratios: 1) EV/EBITDA (enterprise value multiple), 2) Debt/EBITDA (leverage ratio), 3) EBITDA margin (profitability %), 4) Interest Coverage (EBITDA/Interest). Investment grade companies typically have Debt/EBITDA < 3x. Private equity targets often 4-6x.