EBITDA Calculator
Calculate EBITDA to assess a company's operating performance.
Financials
EBITDA
Total EBITDA
₹750,000
Earnings Before Interest, Taxes, Depreciation, and Amortization.
The Valuation Metric
EBITDA is the gold standard for comparing the core profitability of different companies, especially in mergers and acquisitions (M&A).
Breakdown of Terms:
- Earnings: Net Profit.
- Interest: Cost of debt (varies by company debt structure).
- Taxes: Varies by country/state.
- Depreciation: Wear and tear of physical assets (Machines).
- Amortization: Expensing of intangible assets (Patents/Software).
By adding these back, we see how much cash the BUSINESS ITSELF generates, regardless of how it is financed or taxed.
Frequently Asked Questions
What does EBITDA stand for?
EBITDA stands for **Earnings Before Interest, Taxes, Depreciation, and Amortization**.
What is the EBITDA formula?
EBITDA = `Net Income + Interest + Taxes + Depreciation + Amortization`. Alternatively, `Operating Profit + Depreciation + Amortization`.
Why is EBITDA important?
It focuses purely on a company's operational efficiency. It ignores financing decisions (Interest) and accounting decisions (Depreciation), making it easier to compare companies in the same industry.
Is EBITDA the same as Gross Profit?
No. Gross Profit reduces only COGS. EBITDA reduces COGS AND Operating Expenses (Rent, Salaries, Marketing) but adds back Depreciation/Amortization.
What is a good EBITDA margin?
A margin of 10% is average. 20% or above is considered good. SaaS companies often target 40% (Rule of 40).
What is 'adjusted EBITDA'?
Adjusted EBITDA adds back 'one-time' or 'irregular' expenses like legal settlements or stock-based compensation to show a 'normalized' profit figure.
Why does Warren Buffett dislike EBITDA?
He famously said, *'Does management think the tooth fairy pays for capital expenditures?'*. EBITDA ignores the cost of replacing old assets (Capex).
Can EBITDA be negative?
Yes, negative EBITDA limits that the company is losing cash on its core operations. This is common for early-stage startups.
What is Enterprise Value (EV) / EBITDA?
It is a popular valuation ratio. A lower ratio (e.g., <10x) suggests the company might be undervalued.
Is EBITDA GAAP compliant?
No, EBITDA is a 'Non-GAAP' metric. Companies interpret it differently, so always read the footnotes.