EBITDA Calculator

Why EBITDA Matters

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a key metric used to evaluate a company’s operating performance and profitability, independent of financing, accounting, or tax decisions. It’s widely used by investors, lenders, and executives.

How to Use This Calculator

• Revenue: Total sales or service income.
• COGS: Direct production costs (inventory, raw materials, direct labor).
• Operating Expenses: Overhead (salaries, rent, marketing, admin).
• Click “Calculate EBITDA” to see profit before non-operating factors.

Formula Used

Example: $1.2M revenue, $450K COGS, $300K opex →
EBITDA = 1,200,000 − 450,000 − 300,000 = $450,000
Margin = (450,000 / 1,200,000) × 100 = 37.5%

Real-World Applications

• Investors: Compare company profitability across industries
• Startups: Show operational efficiency to attract funding
• M&A: Used in valuation multiples (e.g., 8x EBITDA)
• Lenders: Assess ability to service debt
• Management: Track operational efficiency over time

Industry Benchmarks (EBITDA Margin)

Tips to Improve EBITDA

• ✅ Increase pricing without losing volume
• ✅ Negotiate lower COGS (bulk discounts, better suppliers)
• ✅ Reduce overhead (remote work, automation)
• ✅ Scale efficiently — grow revenue faster than expenses
• ✅ Outsource non-core functions (HR, IT, accounting)

Limitations of EBITDA

While useful, EBITDA has limitations:

• ❌ Ignores debt and interest payments
• ❌ Excludes tax burden
• ❌ Doesn’t account for capital expenditures (CapEx)
• ❌ Can be misleading if used alone (e.g., hides high depreciation)

Always use EBITDA alongside net income, cash flow, and CapEx for a full picture.