EBITDA Calculator
Maximize your financial analysis with our easy-to-use EBITDA Calculator. Quickly calculate your company's earnings before interest, taxes, depreciation, and amortization to assess operational performance and make informed business decisions.
How to Calculate EBITDA
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It's a measure used to evaluate a company's operating performance without the impact of financial and accounting decisions. Here’s how to calculate EBITDA:
Formula for EBITDA
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization
Steps to Calculate EBITDA:
1. Start with Net Income: This is the company's total earnings, also known as net profit. It's the bottom line of the income statement after all expenses, including taxes, interest, depreciation, and amortization have been deducted from total revenue.
2. Add back Interest: Since EBITDA is a measure of operational performance independent of financial structure, add back any interest expenses the company incurred.
3. Add back Taxes: Add the amount of taxes paid back to net income. This step removes the impact of tax strategies and rates, focusing purely on operational earnings.
4. Add back Depreciation and Amortization: These are non-cash expenses related to the gradual charging to expense of fixed assets (depreciation) and intangible assets (amortization). Adding these back provides a clearer picture of the company's operational cash flows.
Example Calculation:
Assume a company has the following financials:
Net Income: $100,000
Interest Expense: $20,000
Taxes Paid: $30,000
Depreciation: $10,000
Amortization: $5,000
Using the EBITDA formula:
EBITDA = $100,000 + $20,000 + $30,000 + $10,000 + $5,000 = $165,000
This means the EBITDA for this period is $165,000. By calculating EBITDA, you can get a sense of the company's profitability from its core operations before the influence of financial structure, tax rates, and non-cash accounting figures.
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Learn more about EBITDA
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EBITDA: What it Is and How to Calculate
EBITDA stands for earnings before interest, taxes, depreciation, and amortization. Simply put, it shows you the profitability of your day-to-day operations.By removing these factors, you can evaluate a company’s profitability and cash flow from their core operations.
Profit and Loss Statements 101 (with Template)
Want to know how profitable your business is? The best way to find out is to create a profit and loss statement.Here’s how you put one together, how to read it, and why profit and loss statements are important for running your business.
Frequently Asked Questions
EBITDA provides insight into a company's operational efficiency by showing earnings before the impact of financial, accounting, and tax decisions. It helps investors and analysts understand how much profit a company generates from its core operations alone, which can be useful for comparing profitability across companies where those external factors differ.
EBITDA and operating income both measure a company’s profitability, but they differ in what they consider. Operating income, also known as operating profit, subtracts operating expenses including depreciation and amortization from gross income. EBITDA adds these non-cash expenses back into net income, providing a clearer picture of cash flow from operations before the influence of accounting and tax treatments.
Yes, EBITDA can be negative when a company’s operating expenses exceed its revenue. A negative EBITDA indicates that a company is facing fundamental issues with profitability and cash flow from its core operations, which might be a red flag for investors looking for healthy, cash-generating businesses.
EBITDA is widely used in valuation metrics, particularly in the calculation of enterprise value (EV) to EBITDA ratios, which help compare the value of a company, including debt, to its cash earnings. This is particularly useful in industries that require significant investments in fixed assets which depreciate. By excluding the effects of financial structure, tax rates, and non-cash accounting figures, EBITDA provides a cleaner assessment of company performance from an investor's perspective.
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