EBITDA Calculator
Calculate EBITDA — Earnings Before Interest, Taxes, Depreciation, and Amortization — and EBITDA margin from a company income statement. Uses the SEC Regulation G bottom-up formula.
EBITDA
£450,000.00
- EBIT (operating income)
- £350,000.00
- Depreciation + amortization
- £100,000.00
- EBITDA margin
- 45%
- Revenue
- £1,000,000.00
EBITDA adds non-cash charges (depreciation, amortization) and capital-structure / jurisdiction items (interest, taxes) back to net income, giving a rough proxy for operating cash flow that is comparable across firms with different leverage, tax regimes, and capex policies. EBITDA margin = EBITDA / revenue shows how much of each dollar (or pound) of sales is left after cash operating costs but before D&A, interest, and tax — typically 10–20% for retail, 20–40% for software, 30–50% for utilities.
How to use this calculator
Read the six numbers off the company's income statement. Revenue (also called net sales or turnover) is the top line. Net income is the bottom line. Interest expense, income tax expense, depreciation, and amortization are all separate line items between them — depreciation and amortization often sit inside cost of goods sold or operating expenses but are broken out in the cash flow statement. The calculator updates as you type and shows EBITDA, the intermediate EBIT figure, and EBITDA margin (EBITDA divided by revenue).
How the calculation works
EBITDA uses the bottom-up "addback" formula: EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization. The first three addbacks rebuild EBIT (operating income); the last two strip out non-cash charges to produce a proxy for cash operating profit. Equivalently, EBITDA = Revenue − Operating Expenses (excluding D&A) from the top down. EBITDA margin = EBITDA / Revenue × 100 expresses cash operating profit as a percentage of sales — a standard benchmark for comparing companies across industries, capital structures, and tax regimes.
Worked example
A SaaS company reports revenue $1,000,000, net income $200,000, interest $50,000, taxes $100,000, depreciation $75,000, and amortization $25,000. EBIT (operating income) = 200,000 + 50,000 + 100,000 = $350,000. D&A = 75,000 + 25,000 = $100,000. EBITDA = 350,000 + 100,000 = $450,000. EBITDA margin = 450,000 / 1,000,000 = 45% — strong, typical of mature software businesses.
Frequently asked questions
What is EBITDA and why does it matter?
EBITDA is a measure of a company's operating cash-generation capacity, stripped of decisions about how it is financed (interest), where it is domiciled (taxes), and how it has chosen to depreciate its assets (D&A). It is widely used in private-equity and LBO valuation (EV / EBITDA multiples), debt covenants (debt / EBITDA leverage), and cross-border comparisons. It is not a GAAP metric — the SEC requires reconciliation to net income under Regulation G — but it is the most-cited number in corporate finance and M&A.
What is the difference between EBIT and EBITDA?
EBIT (Earnings Before Interest and Taxes) is operating income — revenue minus all operating expenses including depreciation and amortization. EBITDA adds D&A back to EBIT. The difference matters most for capital-intensive businesses: an airline or telecom with heavy depreciation will have a much higher EBITDA than EBIT, while a consulting firm with little tangible capex will look similar under both measures. EBITDA is the cash-flow proxy; EBIT is the accounting-profit measure.
Is EBITDA the same as operating cash flow?
No, but it is the closest single-line proxy. EBITDA ignores changes in working capital (receivables, payables, inventory), tax payments, and interest payments, all of which affect actual cash flow. It also ignores capital expenditures, which are a real cash cost. Warren Buffett famously called EBITDA misleading for that reason — "Does management think the tooth fairy pays for capex?". For a true cash-flow figure, use operating cash flow from the cash flow statement, or free cash flow (operating cash flow − capex).
How is EBITDA margin used in valuation?
EBITDA margin is the headline profitability ratio for comparing operating efficiency across companies of different sizes, in different countries, and with different debt loads. Typical bands: grocery retail 3–6%, mass-market retail 8–12%, industrial manufacturing 10–20%, branded consumer goods 15–25%, telecoms 30–40%, software / SaaS 20–40%, utilities and pipelines 40–60%. A company materially below its sector median has either a cost problem, weaker pricing power, or one-off charges weighing on the figure.
Should I use trailing or projected EBITDA?
For valuation multiples, the convention is "next-twelve-months" (NTM) or "forward EBITDA" for growing businesses, "last-twelve-months" (LTM) for stable or distressed ones. For debt covenants, lenders almost always specify LTM EBITDA, often with "adjustments" defined in the credit agreement (add-backs for restructuring, stock-based comp, etc.). The single most important rule: be consistent with what the comparable companies or transactions are using, or the multiple is meaningless.
What are common EBITDA "addbacks" or adjustments?
Adjusted EBITDA (sometimes called "EBITDAX" for explorers, "EBITDAR" with rent added back) layers on further adjustments: stock-based compensation, one-time legal settlements, restructuring charges, M&A transaction costs, owner-manager compensation in small businesses. These are negotiated heavily in M&A and lender diligence. This calculator computes pure SEC-Reg-G-compliant EBITDA — for adjusted EBITDA, add the agreed-upon items into "Depreciation" or "Amortization" as a workaround, or rely on a separate adjusted-EBITDA bridge schedule.