EBITDA Calculator
Reconcile net income to earnings before interest, taxes, depreciation and amortization, with the resulting revenue margin.
- EBITDA margin
- 35%
- EBIT before depreciation add-back
- $28,000
What is EBITDA?
EBITDA is earnings before interest, taxes, depreciation and amortization. Start from net income and add back interest expense, income tax expense and depreciation and amortization: $20,000 + $3,000 + $5,000 + $7,000 = $35,000 of EBITDA, a 35% margin on $100,000 of revenue.
Net income + Interest + Taxes + D&AEBITDA ÷ Revenue × 100EBITDA − Depreciation and amortizationExample: a landscaping company
- Net income $20,000; interest on the truck loan $3,000; income tax $5,000
- Depreciation of trucks and mowers $7,000
- EBITDA: $35,000; EBIT: $28,000; EBITDA margin: 35% of $100,000
Buyers of small businesses often price them as a multiple of EBITDA or of seller’s discretionary earnings, so knowing this number matters before a sale.
What EBITDA leaves out
- Equipment replacement. Depreciation is added back, but trucks and machines still have to be replaced with real cash.
- Working capital. Money tied up in inventory and unpaid invoices is not in EBITDA. It is not operating cash flow.
- Debt payments. Interest is excluded, but the lender still expects it.
EBITDA FAQ
Is EBITDA the same as cash flow?
No. It ignores capital expenditure, changes in working capital and taxes actually paid, so cash flow can be much lower.
What is adjusted EBITDA?
EBITDA with further add-backs such as one-time expenses or owner perks. This calculator does not add any adjustments; list and justify them separately.
Is EBITDA a GAAP measure?
No. US GAAP does not define EBITDA, and public companies that report it must reconcile it to net income.