EBITDA Calculator
This calculator determines a company's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) - a key measure of operational profitability.
Enter the required financial values below to calculate EBITDA. All fields are required for accurate calculation.
Enter Financial Data
Understanding EBITDA
What is EBITDA?
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a measure of a company's operating performance. It shows profitability before accounting for financial structure, tax environment, and non-cash expenses.
EBITDA Formula
The standard EBITDA calculation formula is:
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization
This formula removes non-operating factors to focus on core business profitability.
Why Use EBITDA?
- Compares companies with different capital structures
- Eliminates effects of financing and accounting decisions
- Shows cash flow from operations
- Commonly used in valuation multiples
Limitations of EBITDA
- Doesn't account for capital expenditures
- Can be manipulated through accounting practices
- Not a GAAP measure (non-standardized)
- Ignores changes in working capital
EBITDA Calculation Examples
Click on an example to see the step-by-step calculation:
Example 1: Basic EBITDA Calculation
Scenario: Company reports the following financials (in millions):
1. Input Values:
- Net Income: $50
- Interest: $10
- Taxes: $15
- Depreciation: $8
- Amortization: $2
2. Calculation:
EBITDA = $50 (Net Income) + $10 (Interest) + $15 (Taxes) + $8 (Depreciation) + $2 (Amortization)
3. Result: EBITDA = $85 million
Example 2: Negative Net Income
Scenario: Startup company with the following figures:
1. Input Values:
- Net Income: -$5
- Interest: $3
- Taxes: $1
- Depreciation: $7
- Amortization: $4
2. Calculation:
EBITDA = -$5 + $3 + $1 + $7 + $4
3. Result: EBITDA = $10
Conclusion: Despite negative net income, the company shows positive operational cash flow.
Example 3: High Depreciation Company
Scenario: Manufacturing company with heavy equipment:
1. Input Values:
- Net Income: $20
- Interest: $5
- Taxes: $8
- Depreciation: $25
- Amortization: $2
2. Calculation:
EBITDA = $20 + $5 + $8 + $25 + $2
3. Result: EBITDA = $60
Conclusion: Depreciation significantly impacts the difference between net income and EBITDA.
Example 4: Software Company
Scenario: Tech company with significant amortization:
1. Input Values:
- Net Income: $75
- Interest: $2
- Taxes: $25
- Depreciation: $5
- Amortization: $18
2. Calculation:
EBITDA = $75 + $2 + $25 + $5 + $18
3. Result: EBITDA = $125
Example 5: Retail Business
Scenario: Local retail store financials:
1. Input Values:
- Net Income: $120,000
- Interest: $15,000
- Taxes: $40,000
- Depreciation: $30,000
- Amortization: $5,000
2. Calculation:
EBITDA = $120,000 + $15,000 + $40,000 + $30,000 + $5,000
3. Result: EBITDA = $210,000
Example 6: Company with No Debt
Scenario: Debt-free company financials:
1. Input Values:
- Net Income: $500,000
- Interest: $0
- Taxes: $150,000
- Depreciation: $50,000
- Amortization: $10,000
2. Calculation:
EBITDA = $500,000 + $0 + $150,000 + $50,000 + $10,000
3. Result: EBITDA = $710,000
Example 7: Seasonal Business
Scenario: Seasonal business annual figures:
1. Input Values:
- Net Income: -$30,000
- Interest: $12,000
- Taxes: $0
- Depreciation: $45,000
- Amortization: $8,000
2. Calculation:
EBITDA = -$30,000 + $12,000 + $0 + $45,000 + $8,000
3. Result: EBITDA = $35,000
Example 8: Large Corporation
Scenario: Fortune 500 company (in millions):
1. Input Values:
- Net Income: $2,500
- Interest: $300
- Taxes: $800
- Depreciation: $600
- Amortization: $200
2. Calculation:
EBITDA = $2,500 + $300 + $800 + $600 + $200
3. Result: EBITDA = $4,400 million ($4.4 billion)
Example 9: Service Business
Scenario: Consulting firm with minimal assets:
1. Input Values:
- Net Income: $180,000
- Interest: $5,000
- Taxes: $60,000
- Depreciation: $2,000
- Amortization: $3,000
2. Calculation:
EBITDA = $180,000 + $5,000 + $60,000 + $2,000 + $3,000
3. Result: EBITDA = $250,000
Example 10: Company Acquisition Analysis
Scenario: Evaluating a potential acquisition target:
1. Input Values:
- Net Income: $1.2 million
- Interest: $250,000
- Taxes: $400,000
- Depreciation: $350,000
- Amortization: $150,000
2. Calculation:
EBITDA = $1,200,000 + $250,000 + $400,000 + $350,000 + $150,000
3. Result: EBITDA = $2,350,000
Conclusion: The company might be valued at a multiple of this EBITDA figure.
Frequently Asked Questions about EBITDA
1. What does EBITDA stand for?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It measures a company's operating performance.
2. Why is EBITDA important?
EBITDA is important because it:
- Shows operational profitability before financial structure
- Allows comparison between companies with different capital structures
- Is commonly used in business valuation
- Helps analyze cash flow from core operations
3. What's the difference between EBIT and EBITDA?
EBIT (Earnings Before Interest and Taxes) includes depreciation and amortization, while EBITDA adds them back. EBITDA = EBIT + Depreciation + Amortization.
4. Is EBITDA the same as cash flow?
No, EBITDA is not the same as cash flow. While it approximates operating cash flow, it doesn't account for changes in working capital or capital expenditures.
5. What are the limitations of EBITDA?
Limitations include:
- Doesn't reflect capital expenditures
- Can be manipulated through accounting
- Not a GAAP measure
- May overstate cash flow for asset-intensive businesses
6. How is EBITDA used in valuation?
EBITDA is commonly used in valuation multiples (EV/EBITDA). Companies in the same industry often trade at similar EBITDA multiples, allowing comparison.
7. Can EBITDA be negative?
Yes, EBITDA can be negative if operating expenses exceed gross profit before accounting for interest, taxes, depreciation, and amortization.
8. What's a good EBITDA margin?
A "good" EBITDA margin varies by industry. Generally:
- 10%+ is decent for many businesses
- 20%+ is strong
- 40%+ is exceptional (common in software/SaaS)
9. How do you calculate EBITDA margin?
EBITDA Margin = (EBITDA ÷ Revenue) × 100. It shows what percentage of revenue becomes EBITDA.
10. Why add back depreciation and amortization?
Depreciation and amortization are non-cash expenses that reduce reported earnings but don't affect cash flow. Adding them back shows operational cash generation.
