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EBITDA Calculator

Calculate earnings before interest, taxes, depreciation, and amortization

EBITDA Formulas

EBITDA (Top-Down)
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EBITDA (Bottom-Up)
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EBITDA Margin
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Understanding EBITDA

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It measures a company's operating performance by stripping out non-operating costs and non-cash charges, providing a cleaner view of core business profitability.

By removing interest (capital structure), taxes (jurisdiction-dependent), and D&A (accounting choices), EBITDA allows better comparison across companies with different debt levels, tax situations, and asset bases.

While not a GAAP measure, EBITDA is widely used in valuation (EV/EBITDA multiples), debt covenants, and M&A analysis. It approximates operating cash flow, though it ignores working capital changes and capital expenditures.

Why EBITDA Matters

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Comparability

Removes capital structure, tax, and accounting differences between companies.

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Cash Flow Proxy

Approximates operating cash generation (though imperfectly).

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Valuation Tool

EV/EBITDA multiple is a standard valuation metric for M&A.

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Debt Capacity

Lenders use EBITDA to assess debt servicing ability. Debt/EBITDA is key.

EBITDA Margins by Industry

IndustryTypical EBITDA MarginEV/EBITDA MultipleNotes
Software (SaaS)25-40%15-30xHigh margins, scalable
Manufacturing10-20%6-10xCapital intensive
Retail5-12%5-8xLow margins
Healthcare15-25%10-15xVaries widely
Telecom30-45%6-9xHigh D&A

EBITDA Analysis Tips

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It's Not Cash Flow

EBITDA ignores CapEx, working capital changes, and debt repayment. It overstates cash generation.

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Track Margins

EBITDA margin trends show operational efficiency. Improving margins signal better operations.

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Watch Adjustments

Adjusted EBITDA often excludes stock comp and one-time items. Verify what's being adjusted.

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Complement with FCF

Use Free Cash Flow alongside EBITDA for a complete picture of cash generation.

Frequently Asked Questions

What is a good EBITDA?

EBITDA itself isn't 'good' or 'bad'—it depends on context. Look at EBITDA margin (15-25% is solid for many industries) and compare to peers. Also track trends: growing EBITDA with stable/improving margins is positive.

Why is EBITDA controversial?

Critics (famously Warren Buffett) say EBITDA ignores real costs. Depreciation represents actual asset usage. Interest is real debt cost. EBITDA can make unprofitable companies look healthy by ignoring necessary expenses.

What's the difference between EBIT and EBITDA?

EBIT (Earnings Before Interest and Taxes) is operating income—it includes D&A. EBITDA adds back depreciation and amortization. For capital-intensive businesses, the difference is significant.

How is EBITDA used in valuation?

EV/EBITDA compares enterprise value to EBITDA. It's used for M&A because it neutralizes capital structure. Lower multiples suggest better value. Industry-specific multiples vary from 4x to 20x+.

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