Finance Calculator
EBITDA Calculator
Calculate earnings before interest, taxes, depreciation and amortization from whichever figures you have — EBIT, net income, or revenue and operating expenses. All three routes reach the same number, with EBITDA margin, implied EBIT and interest coverage alongside.
EBITDA Calculator
Earnings before interest, taxes, depreciation & amortization
EBITDA = EBIT + Depreciation + Amortisation
May be negative
Tangible assets
Intangible assets
Only needed for the EBITDA margin
Results
EBITDA
$190,000.00
before interest, tax & D&A
EBITDA Margin
—
enter revenue to show
Breakdown
Related Metrics
Enter revenue to see the EBITDA margin, which is more useful than the absolute figure when comparing companies of different sizes.
EBITDA strips out financing, tax and non-cash charges, which is what makes it a common proxy for operating cash generation and a standard basis for valuation multiples.
The $40,000.00 of depreciation and amortisation added back is non-cash, but it represents real assets being used up. EBIT of $150,000.00 is the stricter measure of the two.
EBITDA is not a GAAP measure, so companies define it with some latitude and often present an "adjusted" version with further add-backs. Check what has been excluded before relying on a reported figure.
Step-by-Step Calculation
Method — From EBIT
EBITDA = EBIT + Depreciation + Amortisation
Step 1 — Total non-cash charges
D&A = Depreciation + Amortisation = $30,000.00 + $10,000.00 = $40,000.00
Step 2 — Add back to EBIT
EBITDA = $150,000.00 + $40,000.00
EBITDA = $190,000.00
Result
EBITDA = $190,000.00
Understanding EBITDA
EBITDA removes four things from net income: interest, tax, depreciation and amortization. The first two depend on how a company is funded and where it operates; the second two are non-cash charges reflecting accounting judgements about how fast assets lose value.
Strip all four out and what remains approximates what the business generates from trading. That is why EBITDA became the standard denominator for valuation multiples and debt covenants — it lets a leveraged company and a debt-free one, or an aggressive depreciator and a conservative one, be compared on the same basis.
It is also why EBITDA is the most criticised measure in finance. Adding back depreciation treats asset consumption as costless, when those assets will need replacing with real money. The gap between EBITDA and EBIT is exactly the size of that blind spot.
EBITDA Formulas
1. From EBIT
2. From Net Income
3. From Revenue
4. EBITDA Margin
One Company, Three Routes, Same Answer
The three formulas are the same identity entered at different points on the income statement:
| Income Statement Line | Amount |
|---|---|
| Revenue | $800,000.00 |
| less Operating Expenses (ex-D&A) | $520,000.00 |
| EBITDA | $280,000.00 |
| less Depreciation | $35,000.00 |
| less Amortization | $5,000.00 |
| EBIT | $240,000.00 |
| less Interest Expense | $20,000.00 |
| Earnings Before Tax | $220,000.00 |
| less Tax Expense | $25,000.00 |
| Net Income | $195,000.00 |
| Method | Working | EBITDA |
|---|---|---|
| From EBIT | $240,000 + $35,000 + $5,000 | $280,000.00 |
| From Net Income | $195,000 + $20,000 + $25,000 + $40,000 | $280,000.00 |
| From Revenue | $800,000 − $520,000 | $280,000.00 |
Note where EBITDA sits: above depreciation on the statement, which is why it is the first profit line most companies reach and the most flattering one they can quote.
Getting the Revenue Route Right
The revenue route looks the simplest and is the easiest to get wrong, because "operating expenses" has to mean something precise here:
- Cost of goods sold
- Selling, general & administrative
- Research & development
- Salaries and wages
- Rent and utilities
- Depreciation
- Amortization
- Interest expense
- Income tax
- Non-operating items
Two mistakes to avoid. Leaving COGS out overstates EBITDA badly — on Example 3 it would turn a reasonable 35% margin into a fiction. Leaving D&A in produces EBIT instead, understating EBITDA by the full D&A amount. Reported income statements usually show D&A as its own line, which makes it straightforward to separate.
How Far EBITDA Sits Above EBIT
The gap is entirely depreciation and amortization, so it scales with how asset-heavy the business is. Holding EBIT at $150,000 on $500,000 of revenue:
| D&A | EBITDA | Above EBIT | EBITDA Margin |
|---|---|---|---|
| $0 | $150,000.00 | +0.0% | 30.00% |
| $20,000 | $170,000.00 | +13.3% | 34.00% |
| $40,000 (Example 1) | $190,000.00 | +26.7% | 38.00% |
| $75,000 | $225,000.00 | +50.0% | 45.00% |
| $150,000 | $300,000.00 | +100.0% | 60.00% |
| $250,000 | $400,000.00 | +166.7% | 80.00% |
Identical operating profit throughout, EBITDA margins from 30% to 80%. When a company leads with EBITDA rather than EBIT, the size of this gap is the first thing worth checking.
When EBITDA Is Positive and EBIT Is Not
This is the case worth being able to spot. Take a company with $400,000 of revenue, an operating loss of −$30,000, and $60,000 of depreciation and amortization:
| Measure | Amount | Margin | Reads As |
|---|---|---|---|
| EBITDA | $30,000.00 | +7.50% | Modestly profitable |
| EBIT | −$30,000.00 | −7.50% | Operating loss |
A perfectly symmetric +7.50% against −7.50%, from one set of accounts. The business covers its cash costs but not the cost of the assets it is consuming — so it is profitable only for as long as nothing needs replacing. Quoting the EBITDA margin alone here would be accurate and deeply misleading, which is the essence of the criticism aimed at this metric.
Reading the EBITDA Margin
On $800,000 of revenue:
| EBITDA | Margin | What It Suggests |
|---|---|---|
| −$80,000 | −10.00% | Losing money on day-to-day trading |
| $0 | 0.00% | Cash breakeven before any asset cost |
| $80,000 | 10.00% | Thin; typical of retail and airlines |
| $160,000 | 20.00% | Solid for most industries |
| $280,000 | 35.00% | Strong (Example 3) |
| $400,000 | 50.00% | High; software, licensing, or heavy D&A |
A high EBITDA margin has two very different causes: genuinely high profitability, or large depreciation being added back. Checking the EBIT margin alongside it is the only way to tell which.
Benefits of Using the EBITDA Calculator
Example Calculations
One worked example for each route:
Example Scenario 1 — From EBIT
EBIT $150,000, depreciation $30,000, amortization $10,000.
Total D&A = $30,000 + $10,000 = $40,000
EBITDA = EBIT + D&A
EBITDA = $150,000 + $40,000 = $190,000
EBITDA reads 26.67% higher than EBIT
The $40,000 is non-cash, but the assets behind it still wear out
Result: $190,000
Example Scenario 2 — From Net Income
Net income $90,000, interest $20,000, taxes $25,000, depreciation $35,000, amortization $5,000.
Add back interest and tax first: $90,000 + $20,000 + $25,000 = $135,000 (EBIT)
Then add back non-cash charges: $35,000 + $5,000 = $40,000
EBITDA = $135,000 + $40,000 = $175,000
Earnings Before Tax = $90,000 + $25,000 = $115,000
EBITDA covers interest 8.75 times over
Result: $175,000, with an implied EBIT of $135,000
Example Scenario 3 — From Revenue
Revenue $800,000, operating expenses excluding D&A $520,000.
EBITDA = Revenue − Operating Expenses (ex-D&A)
EBITDA = $800,000 − $520,000 = $280,000
EBITDA Margin = $280,000 ÷ $800,000 × 100 = 35.00%
Operating expenses here must include COGS and exclude D&A
Adding $40,000 of D&A gives EBIT of $240,000, a 30.00% margin
Result: $280,000
Why EBITDA Is Criticised
The objection is not that EBITDA is wrong but that it is incomplete in a predictable direction. Adding back depreciation treats asset consumption as costless, while the cash to replace those assets still has to be found — so EBITDA ignores capital expenditure entirely, which for a capital-intensive business is the single largest claim on its cash. It also excludes working capital movements, so a company growing fast can report rising EBITDA while cash drains into receivables and inventory, and it excludes the real cost of debt, which is why debt covenants written against EBITDA are more forgiving than those written against EBIT. Because it is not a GAAP or IFRS measure, definitions vary, and "adjusted EBITDA" can carry further add-backs for restructuring, share-based compensation and items a company would rather set aside. None of that makes the figure useless — it is a reasonable starting proxy for trading performance and the standard basis for valuation multiples. Read it alongside EBIT and free cash flow, and check what has been adjusted out. This is general information, not financial advice.
Frequently Asked Questions
- What is EBITDA?
- Earnings before interest, taxes, depreciation and amortization. It strips out financing costs, tax and non-cash charges to show what a business earns from trading. On $800,000 of revenue with $520,000 of operating expenses excluding D&A, EBITDA is $280,000.
- How do you calculate EBITDA?
- Three routes reach the same figure. From EBIT: add depreciation and amortization. From net income: add back interest, taxes, depreciation and amortization. From revenue: subtract operating expenses that exclude D&A. Use whichever matches the figures you have.
- What is the difference between EBIT and EBITDA?
- Depreciation and amortization. EBITDA adds them back; EBIT does not. On Example 1, EBIT of $150,000 becomes EBITDA of $190,000 — 26.67% higher. The wider that gap, the more capital-intensive the business, and the more EBITDA flatters it.
- Why is EBITDA used so widely?
- Because it approximates operating cash generation and makes companies comparable regardless of how they are funded, taxed or how aggressively they depreciate assets. It is also the standard denominator for valuation multiples and debt covenants.
- What does EBITDA ignore?
- Capital expenditure above all. It adds back depreciation on the basis that no cash moved, while ignoring the cash that will be spent replacing those assets. It also excludes working capital movements and the real cost of debt, so a company can report strong EBITDA while consuming cash.
- What is a good EBITDA margin?
- It depends heavily on the industry. Software and pharmaceuticals often exceed 30%, while grocery retail and airlines run in single digits. A 35% margin is strong in most sectors. Because EBITDA excludes D&A, capital-heavy industries naturally post higher EBITDA margins than their EBIT margins justify.
- Can EBITDA be positive while EBIT is negative?
- Yes, and it is the most important case to recognise. A company with −$30,000 of EBIT and $60,000 of D&A has $30,000 of EBITDA: it covers its cash costs but not the cost of the assets it consumes. The EBITDA margin reads +7.50% while the EBIT margin is −7.50%.
- Why keep depreciation and amortization separate?
- Because they describe different things. Depreciation writes down tangible assets like machinery and buildings; amortization writes down intangibles like patents, software and acquired goodwill. A company whose add-backs are mostly amortization from acquisitions is a different proposition from one replacing physical plant.
- Is EBITDA a GAAP measure?
- No. It is not defined under GAAP or IFRS, so companies have latitude in how they calculate it, and many report an "adjusted EBITDA" with further add-backs for restructuring, share-based compensation or one-off items. Always check what has been excluded before relying on a reported figure.
- Does EBITDA tell me if debt is affordable?
- Only loosely. Dividing EBITDA by interest gives a coverage figure — 8.75× in Example 2 — but lenders usually measure coverage against EBIT, which is lower and less forgiving. Debt covenants often use EBITDA because borrowers prefer it, not because it is the stricter test.