EBITDA Calculator
EBITDA strips interest, taxes, depreciation and amortization out of earnings to show how much cash a company’s core operations throw off. Choose the net-income or operating-income build-up, then get EBITDA, the EBITDA margin, EBIT, interest coverage and an optional EV/EBITDA valuation multiple.
Formula
Worked example
Net income $250,000, interest $40,000, taxes $70,000 gives EBIT of $360,000. Add depreciation $60,000 and amortization $30,000: EBITDA = 360,000 + 90,000 = $450,000. On $1,500,000 revenue the EBITDA margin is 30%, and at an 8x multiple the implied enterprise value is $3,600,000.
What EBITDA actually measures
EBITDA, earnings before interest, taxes, depreciation and amortization, is a proxy for the cash profit a business generates from its core operations. It strips out four items that have nothing to do with day-to-day operating performance: interest, which reflects how the company is financed; taxes, which depend on jurisdiction and structure; and depreciation and amortization, which are non-cash accounting allocations of past spending. Removing these lets investors compare two companies on operating performance alone, regardless of debt loads or asset bases.
Two ways to build up EBITDA
This calculator offers both standard routes to the same number. The net-income method (bottom-up) starts at the bottom line and adds back interest, taxes, depreciation and amortization. The operating-income method starts at operating income, also called EBIT, and adds back only depreciation and amortization, since interest and taxes are already excluded above the operating line. Pick whichever method matches the figures on the income statement in front of you. The calculator also reports EBIT on its own, because EBITDA minus depreciation and amortization equals EBIT.
Margins, coverage and the EV/EBITDA multiple
Dividing EBITDA by total revenue gives the EBITDA margin, a percentage that scales across companies of different sizes; the EBIT margin is shown alongside it. Interest coverage, EBITDA divided by interest expense, tells lenders how comfortably operating cash can service debt, with 3x or higher generally seen as healthy. Turn on the valuation add-on to apply an EV/EBITDA multiple and get an implied enterprise value, the headline number in most private-company and acquisition valuations. Multiples vary widely by sector and growth, so treat the result as a planning figure, not an appraisal.
The limits of EBITDA
EBITDA is not a substitute for cash flow. It ignores capital expenditure, working-capital swings and the real interest a leveraged company must pay, so a capital-intensive firm with a strong EBITDA margin can still burn cash. Because EBITDA is not defined under GAAP or IFRS, companies calculate it differently and sometimes adjust it further (adjusted EBITDA), so always check what each firm adds back before comparing. Pair EBITDA with free cash flow and net debt before drawing conclusions.
Rough EV/EBITDA multiple ranges
| Company profile | Typical EV/EBITDA |
|---|---|
| Small private business | 3× to 6× |
| Mid-market, stable growth | 6× to 10× |
| Established public company | 8× to 14× |
| High-growth or software | 12× and above |
Indicative only. Actual multiples depend on growth, margins, risk and market conditions.
Frequently asked questions
How do you calculate EBITDA?
Two common methods reach the same figure. The net-income method starts with net income and adds back interest expense, income taxes, depreciation and amortization. The operating-income method starts with operating income (EBIT) and adds back depreciation and amortization. This calculator supports both, so use whichever line items you have.
What is the difference between EBIT and EBITDA?
EBIT is earnings before interest and taxes, operating profit that still deducts depreciation and amortization. EBITDA adds those two non-cash charges back, so EBITDA is always equal to or larger than EBIT. The calculator shows both, since EBITDA minus depreciation and amortization equals EBIT.
What is the EV/EBITDA multiple used for?
EV/EBITDA compares a company’s enterprise value to its EBITDA and is one of the most common valuation multiples, especially for private companies and acquisitions. Turn on the valuation add-on, enter a multiple, and the calculator returns an implied enterprise value. Multiples vary widely by sector and growth, so use comparable companies to choose a realistic figure.
Is a higher EBITDA margin always better?
Generally a higher margin signals more efficient core operations, but the metric ignores capital spending, debt service and taxes. A capital-intensive firm with a high EBITDA margin can still burn cash once heavy capital expenditure is counted, so pair EBITDA with free cash flow before drawing conclusions.