EBITDA Calculator

Enter your net income and add-back items to calculate EBITDA and EBITDA margin.

EBITDA Calculator

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Net income ($)

Total revenue ($, for margin)

Interest expense ($)

Taxes ($)

Depreciation ($)

Amortization ($)

EBITDA	$800,000.00
EBITDA margin	20.0%

EBITDA is not a GAAP metric - it's a supplementary measure. It excludes capital expenditures and working capital changes, so it can overstate a capital-intensive business's true cash generation.

The formula

EBITDA = Net income + Interest + Taxes + Depreciation + Amortization EBITDA margin = EBITDA / Total revenue

Example

$500,000 net income, $50,000 interest, $150,000 taxes, $80,000 depreciation, $20,000 amortization: EBITDA of $800,000 - an EBITDA margin of 20% on $4,000,000 revenue.

Step-by-step guide

Start with net income from the bottom of the income statement.
Add back interest, taxes, depreciation, and amortization - all four are added back regardless of their sign, since EBITDA aims to show operating performance before financing and accounting decisions.
Divide by revenue for EBITDA margin to compare profitability across companies of different sizes or capital structures.

Why EBITDA exists - and why it's controversial

EBITDA was popularized as a way to compare companies' core operating performance while stripping out differences caused by financing choices (interest), tax jurisdictions (taxes), and accounting decisions about past capital investments (depreciation and amortization). This makes it useful for comparing two similar companies where one has more debt or different asset accounting than the other. The controversy comes from what it leaves out: EBITDA ignores capital expenditures entirely, which can make a capital-intensive business (like a manufacturer needing constant equipment reinvestment) look far more cash-generative than it actually is. Famed investor Warren Buffett has been a notable, vocal critic of EBITDA for exactly this reason - it can flatter businesses that require heavy ongoing capital spending just to maintain their operations.

Common mistakes

Treating EBITDA as equivalent to actual cash flow - it ignores capital expenditures and working capital changes, both of which can consume significant real cash even in a business with strong EBITDA.

Comparing EBITDA margins across industries without context - capital-light software businesses naturally run much higher EBITDA margins than capital-intensive manufacturers, so cross-industry comparisons can be misleading.

Frequently asked questions

Is EBITDA the same as operating income?

Close but not identical - operating income (EBIT) already excludes interest and taxes but still includes depreciation and amortization as expenses. EBITDA adds those back too, making it a step further removed from net income than EBIT.

Why do buyers often use EBITDA multiples in acquisitions?

EBITDA multiples (enterprise value divided by EBITDA) let buyers compare target companies on a basis that isn't distorted by the seller's existing debt load or tax situation, since a new owner may finance and structure the deal completely differently.

What is "Adjusted EBITDA" and how does it differ from standard EBITDA?

Adjusted EBITDA further excludes one-time or non-recurring items (like restructuring costs or a one-time legal settlement) that management argues don't reflect ongoing operations - since there's no single standard definition, these adjustments deserve careful scrutiny in any deal or report that features them.

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