CodesBeautify

EBITDA Calculator

Build EBITDA from the bottom of the income statement or the top, and see the margin it produces.

Inputs
EBITDA resultCalculated
EBITDA1,280,000.00
Formula
EBITDAnet income + interest + taxes + depreciation + amortisation
Inputs
  Method                     Build up from net income
  Net income                 620,000.00
  Interest expense           90,000.00
  Income tax expense         210,000.00
  Depreciation               300,000.00
  Amortisation               60,000.00
  Revenue (for the margin)   5,000,000.00
Working
EBIT620,000.00 + 90,000.00 + 210,000.00 = 920,000.00
EBITDA920,000.00 + 300,000.00 + 60,000.00 = 1,280,000.00
Results
  EBIT                          920,000.00
  Non-cash charges added back   360,000.00
  EBITDA                        1,280,000.00
  EBITDA margin                 25.60%
  EBIT margin                   18.40%
Runs locally in your browser

About the EBITDA Calculator

EBITDA takes operating profit and adds back depreciation and amortisation, the two charges that reduce profit without any cash leaving the business. The result is a rough proxy for operating cash generation and the number most commonly used in acquisition pricing. Starting from 620,000 of net income with 90,000 of interest, 210,000 of tax, 300,000 of depreciation and 60,000 of amortisation gives 1,280,000.

The build up route is the one lenders and buyers use because it starts from an audited figure and every add back is visible. The revenue route reaches the same place from the top, subtracting cost of goods sold and operating expenses before adding the non cash charges, which suits a forecast where no tax line exists yet. Whichever you pick, filling in revenue produces the EBITDA margin, 25.6 percent in the example above, which is what actually gets compared across a peer group.

The criticism of EBITDA is fair and worth remembering: ignoring depreciation pretends that machinery never needs replacing, and ignoring interest flatters a heavily borrowed company. It works best for capital light businesses and as one measure among several. Once you have the figure, the EBITDA Multiple Calculator turns it into a valuation, and the charge you added back can be checked against the schedule in the Depreciation Calculator.

How to use

  1. Choose the method that matches the figures you have to hand.
  2. For the build up, enter net income, interest expense and income tax.
  3. Enter depreciation and amortisation separately, taken from the cash flow statement.
  4. Fill in revenue as well so the EBITDA margin appears in the results.

Common questions

What is the EBITDA formula?
Net income plus interest, plus taxes, plus depreciation, plus amortisation. From the top down it is revenue minus operating costs, with depreciation and amortisation added back.
What is a good EBITDA margin?
It varies hugely by sector. Software firms often exceed 30 percent while grocery retail runs in low single digits, so only compare within an industry.
Why do buyers like EBITDA?
It removes financing and tax choices the buyer will change anyway, giving a cleaner view of what the operations earn before the new owner structures the deal.
Is EBITDA the same as cash flow?
No. It ignores working capital swings and capital spending, both of which consume real cash, so free cash flow is usually the lower and more honest figure.