Handeware
Business

EBITDA

$125,000.00
EBITDA margin
25%

This is arithmetic for general information, not financial advice.

EBITDA Calculator

EBITDA is earnings before interest, taxes, depreciation and amortization. It shows how much a business earns from its running work, before loans, taxes and the wear on older equipment are counted.

How it works

From net income, add back interest, income taxes, depreciation and amortization. From operating income, add back only depreciation and amortization, since operating income already comes before interest and taxes.

The margin is EBITDA divided by revenue, times 100.

Worked example

On revenue of $500,000.00, EBITDA comes to $125,000.00, which is a margin of 25%.

Questions

Is EBITDA the same as profit?

No. It leaves out interest, taxes and the cost of wearing out equipment, so it is usually higher than net profit.

Where do I find these numbers?

They are on the income statement. Net income is the bottom line, and operating income sits above interest and taxes.

Does EBITDA show cash?

Not exactly. It ignores changes in working capital and spending on equipment, so cash can differ a lot from EBITDA.

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