EBITDA Calculator
An EBITDA calculator determines a company's earnings before interest, taxes, depreciation, and amortization. EBITDA is commonly used to evaluate operating performance and compare businesses without directly considering financing, taxes, and certain non-cash expenses.
What Is EBITDA?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It provides a measure of operating earnings before these expenses are deducted.
EBITDA Formula
One common formula is:
EBITDA = EBIT + Depreciation + Amortization
It can also be calculated from net income:
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization
How to Calculate EBITDA
Suppose a company has:
- Net income = $100,000
- Interest expense = $20,000
- Taxes = $30,000
- Depreciation = $15,000
- Amortization = $5,000
Using the formula:
EBITDA = $100,000 + $20,000 + $30,000 + $15,000 + $5,000
EBITDA = $170,000
EBITDA From Operating Income
If operating income, also called EBIT, is known, EBITDA can be calculated by adding depreciation and amortization:
EBITDA = Operating Income + Depreciation + Amortization
For example, if operating income is $250,000, depreciation is $40,000, and amortization is $10,000:
EBITDA = $250,000 + $40,000 + $10,000 = $300,000
EBITDA Margin
EBITDA margin expresses EBITDA as a percentage of revenue:
EBITDA Margin = (EBITDA Γ· Revenue) Γ 100
If EBITDA is $300,000 and revenue is $1,000,000:
EBITDA Margin = (300,000 Γ· 1,000,000) Γ 100 = 30%
EBITDA Example
| Item | Amount |
|---|---|
| Net income | $100,000 |
| Interest | $20,000 |
| Taxes | $30,000 |
| Depreciation | $15,000 |
| Amortization | $5,000 |
| EBITDA | $170,000 |
Why Is EBITDA Used?
EBITDA can make it easier to compare the operating performance of companies with different capital structures, tax situations, or levels of depreciation and amortization. It is also frequently used in business valuation and financial analysis.
EBITDA vs. Net Income
Net income accounts for interest, taxes, depreciation, amortization, and other expenses included in the income statement. EBITDA adds back interest, taxes, depreciation, and amortization to provide a different view of earnings.
EBITDA is not the same as cash flow because it does not account for items such as capital expenditures, changes in working capital, debt payments, or taxes actually paid.
Common Mistakes to Avoid
Do not treat EBITDA as a measure of net profit or available cash. It is a financial performance metric with specific limitations.
Also make sure depreciation and amortization are added back only once when calculating EBITDA.
Quick Summary
An EBITDA calculator estimates earnings before interest, taxes, depreciation, and amortization. The common formula is EBITDA = EBIT + Depreciation + Amortization. EBITDA can help compare operating performance, but it should be considered alongside other financial measures rather than used as a standalone measure of profitability or cash flow.