EBITDA Calculator

What is the EBITDA Calculator?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortisation. It strips out financing decisions (interest), tax environments and non-cash accounting charges (depreciation and amortisation) to show how much profit a company generates from its core operations. An EBITDA calculator builds this figure from your income statement and expresses it as a margin of revenue.

How does it work?

Starting from net income (profit after tax), the calculator adds back interest, taxes, depreciation and amortisation. This reverses the items that EBITDA deliberately ignores, leaving a measure of operating performance that is comparable across companies with different debt levels, tax rates and asset bases.

Formula

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortisation

• Net Income = profit after all expenses and tax
• Interest = interest expense on borrowings
• Taxes = income tax expense
• Depreciation = non-cash charge on tangible assets
• Amortisation = non-cash charge on intangible assets

Example calculation

Benefits

• ✓Compares core operating profitability across companies and sectors.
• ✓Removes the distortion of differing capital structures and tax regimes.
• ✓Widely used in valuation multiples such as EV/EBITDA.

Limitations

• !Ignores real cash needs like capital expenditure and working capital.
• !Can overstate health for capital-intensive or highly indebted firms.
• !Not a defined measure under accounting standards, so definitions vary.

Conclusion

EBITDA is a useful lens on operating performance, but it is not a substitute for cash flow or net profit. Use it alongside metrics that capture capital spending and debt to form a complete view of a company’s financial health.