EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It is a commonly used operating-performance measure that focuses on earnings before these specified expenses. The calculator can help reconstruct EBITDA from operating figures or estimate it from net income when the required adjustments are known.
Quick Answer
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization
An alternative operating form is EBITDA = EBIT + Depreciation + Amortization.
Inputs Explained
Net income is profit after interest, taxes, depreciation, and amortization. Interest reflects financing costs, taxes are income-tax expenses, and depreciation and amortization represent non-cash expense allocations. The exact figures should come from consistent financial statements.
How to Use the EBITDA Calculator
- Enter net income and the applicable interest, tax, depreciation, and amortization amounts, if using the reconciliation method.
- Alternatively, enter EBIT plus depreciation and amortization if those figures are available.
- Calculate EBITDA and check that all figures cover the same reporting period.
Worked Examples
Example 1
Suppose net income is $80,000, interest is $10,000, taxes are $20,000, depreciation is $12,000, and amortization is $3,000. EBITDA = 80,000 + 10,000 + 20,000 + 12,000 + 3,000 = $125,000.
Example 2
If EBIT is $150,000, depreciation is $18,000, and amortization is $7,000, EBITDA = $175,000.
EBITDA Examples
| EBIT | D&A | EBITDA |
|---|---|---|
| $100,000 | $15,000 | $115,000 |
| $250,000 | $40,000 | $290,000 |
| $500,000 | $75,000 | $575,000 |
EBITDA Margin
EBITDA can also be expressed relative to revenue: EBITDA Margin = EBITDA Γ· Revenue Γ 100. For example, $125,000 of EBITDA on $500,000 of revenue produces a 25% EBITDA margin. Comparing margins can be more informative than comparing absolute EBITDA between businesses of different sizes.
What EBITDA Does Not Show
EBITDA excludes interest, taxes, depreciation, and amortization by definition. It therefore does not represent net income or cash flow. It also does not account for capital expenditures, changes in working capital, debt principal repayments, or every other cash requirement of a business.
Common Mistakes
- Calling EBITDA the same thing as free cash flow.
- Adding back an expense that is already excluded from the starting profit measure.
- Mixing annual and quarterly figures.
- Comparing EBITDA without considering differences in accounting practices or business structure.
Important
This calculator is for general educational and informational purposes and is not investment, accounting, or financial advice. EBITDA is a financial metric with limitations and should be evaluated alongside other measures and the underlying financial statements.