EBITDA Calculator
Measure operating profitability before financing, tax and non-cash charges
Enter the figures from one income statement
Free, no sign-up, and the answer updates as you type.
Which period do these figures cover?
Every box below has to cover that same stretch of time. Mixing one quarter of profit with a full year of depreciation produces a number that means nothing, and it is the easiest mistake to make with this calculation.
Which figure are you starting from?
Pick whichever figure you already have in front of you. Net income is the last line of the income statement; operating income sits further up, above the interest and tax lines. Whichever you choose, the panel below also shows you what the other route makes of the same numbers.
Enter every figure in the currency and the units the filing uses, for example all of them in millions. The answer comes back in those same units, so this calculator never assumes a currency for you.
The bottom line of the income statement: what is left after every cost, including interest and tax. A loss goes in with a minus sign in front of it.
What the company paid to its lenders over the same period. It is a cost, so type it as a positive number.
The income tax expense on the income statement, not the cash actually paid to the tax office. A tax credit goes in with a minus sign.
The non-cash charge for physical assets wearing out: buildings, machinery, vehicles, fittings. It cannot be negative.
The same idea for intangible assets: software, patents, licences, customer lists bought in an acquisition. Type 0 if the company reports none.
Total sales for the same period, the top line of the income statement. Leave it empty and the calculator simply skips the EBITDA margin.
What these figures add up to
EBITDA for the full year
780.00
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization
Net Income
500.00
Interest
50.00
Taxes
120.00
Depreciation
80.00
Amortization
30.00
In plain words: over one full year the company kept 500.00 once everything had been paid for. Add back the 50.00 of interest it paid its lenders, the 120.00 of income tax, and the 80.00 of depreciation and 30.00 of amortization that no cash ever left the building for, and you get 780.00. That is what the operations earned before financing, tax and the accountants' charge for assets wearing out.
The same figures through the other method
Both routes give 780.00 here, because the operating income you entered is exactly net income plus interest plus tax. That is what a consistent set of figures looks like, and it is why the example this page starts with reconciles to the last digit. Real filings often will not, and the note below explains why.
Why the two routes drift apart on real accounts: net income carries items that operating income never touched. Interest and investment income, gains and losses on selling assets or whole businesses, one-off restructuring and legal charges, the share of profit from associates, and the profit belonging to minority shareholders in subsidiaries all sit between the operating line and the bottom line. So net income plus interest plus tax rarely equals the operating income a company reports. When your two answers differ, the top-down figure is the one most analysts quote, because it is built on the operating result the company itself published, and the size of the gap is worth a look on its own: it shows how much of the bottom line came from outside ordinary trading.
EBITDA Margin
26.0%
EBITDA margin is EBITDA divided by revenue. Margins are only meaningful when compared within the same industry, an asset-light software firm and a capital-intensive manufacturer naturally run very different margins.
How much of this EBITDA survives replacing what wears out
EBITDA adds depreciation and amortization back, but the machines, vehicles and software behind those charges do have to be paid for again one day. Taking the 110.00 of depreciation and amortization you entered as a rough stand-in for that bill, here is what would be left of EBITDA at different levels of spending.
| If the company had to spend | That is | Left from EBITDA | Share of EBITDA left |
|---|---|---|---|
| Nothing at all | 0.00 | 780.00 | 100.0% |
| Half of the depreciation and amortization | 55.00 | 725.00 | 92.9% |
| All of the depreciation and amortization (closest to standing still) | 110.00 | 670.00 | 85.9% |
| Half as much again as the depreciation and amortization | 165.00 | 615.00 | 78.8% |
This is an illustration, not the company's real spending. The actual figure is in the cash flow statement, usually called purchases of property, plant and equipment, or capital expenditure. Compare it with the depreciation line: a business that has to spend far more than it depreciates simply to stay level is turning much less of its EBITDA into cash than the headline suggests.
Insight: EBITDA approximates operating cash earnings before financing and accounting choices, which makes it useful for comparing companies. But it is not free cash flow: it ignores capital expenditure, working-capital changes and the real cost of replacing assets, so always read it alongside cash flow and the balance sheet.
The example this page starts with
The figures already in the boxes belong to a company invented for this page, not to any real business. Over one full year it reported net income of 500, interest expense of 50, income tax of 120, depreciation of 80 and amortization of 30, on revenue of 3,000. Starting at the bottom line: 500 plus 50 plus 120 plus 80 plus 30 gives an EBITDA of 780. Starting from operating income instead: this company reported operating income of 670, which is its 500 of net income plus the 50 of interest and the 120 of tax, so 670 plus 80 plus 30 gives the same 780. The EBITDA margin is 780 divided by 3,000, which is 26.0%. Type over any box with your own company's figures, and use the reset link above to bring the example back.
EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortization. It tries to isolate the profitability of a company's core operations by removing the effects of how the business is financed (interest), where it is taxed (taxes), and non-cash accounting charges (depreciation and amortization). This calculator builds EBITDA up from net income or down from operating income.
EBITDA = Net Income + Interest + Taxes + D + A
EBITDA = Operating Income (EBIT) + D + A
Step 1: Say which period the figures cover, a full year or a single quarter, and keep every box on that same period.
Step 2: Choose your starting figure. Starting from net income you need interest, tax, depreciation and amortization as well; starting from operating income you only need depreciation and amortization.
Step 3: Optionally enter total revenue to calculate the EBITDA margin as a percentage of sales.
Step 4: There is no button to press. EBITDA, the breakdown and the margin update as you type, the panel underneath shows what the other method makes of the same figures, and the table below it shows how much of the answer survives once assets have to be replaced.
What Is EBITDA?
EBITDA, Earnings Before Interest, Taxes, Depreciation and Amortization, is a measure of a company's operating performance. The goal is to approximate how much profit a business generates from its core operations before the effects of its financing decisions, its tax jurisdiction, and the non-cash accounting charges that reduce reported net income. Because it removes these items, EBITDA is often used as a rough proxy for operating cash earnings.
EBITDA strips out interest because two otherwise identical companies can carry very different amounts of debt; it strips out taxes because tax rates differ across countries and over time; and it strips out depreciation and amortization because those are non-cash charges that depend on past investment and accounting policy rather than current operations. The aim is a number that lets you compare the underlying operating profitability of different businesses more directly.
The Two EBITDA Formulas
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization
EBITDA = Operating Income (EBIT) + Depreciation + Amortization
The bottom-up method starts at the bottom of the income statement with net income and works back up, adding back the interest, taxes, depreciation and amortization that were subtracted to arrive at net income. This is the version most people learn first because it reconstructs EBITDA directly from the reported profit figure.
The top-down method starts from operating income, also called EBIT, earnings before interest and taxes, and adds back the two non-cash charges, depreciation and amortization. Since EBIT already excludes interest and taxes, those two add-backs are all you need, which makes this the quicker route whenever operating income is reported directly. In a textbook the two methods land on the same number, and on the example this page starts with they do. On a real filing they usually will not, because net income carries items that operating income never touched: interest and investment income, gains and losses on selling assets or whole businesses, one-off restructuring and legal charges, the share of profit from associates, and the profit attributable to minority shareholders in subsidiaries. Net income plus interest plus tax is therefore rarely exactly equal to reported operating income. If your two answers differ, nothing is broken. Most analysts quote the top-down figure, because it is built on the operating result the company itself published, and the size of the gap tells you how much of the bottom line came from outside ordinary trading.
How EBITDA Is Used in Investing
EBITDA's main strength is comparability. Because it is calculated before interest and taxes, it lets investors compare the operating profitability of companies that carry different debt loads or operate under different tax regimes. The EBITDA margin, EBITDA as a percentage of revenue, is a common way to gauge how efficiently a company converts sales into operating earnings, though it only carries meaning when compared between companies in the same industry.
EBITDA is best known as the denominator of the EV/EBITDA multiple, where enterprise value is divided by EBITDA. Because enterprise value captures the value of the business to all capital providers and EBITDA is measured before financing and tax, the pair allows a more like-for-like valuation comparison across companies with different capital structures than the price-to-earnings ratio. To dig deeper, calculate the numerator with our enterprise value calculator and read how the two fit together.
Related tools and reading: Enterprise Value Calculator · EV/EBITDA glossary entry · EV/EBITDA Explained
The Criticisms of EBITDA
EBITDA has well-known limitations, and some of the most prominent value investors have warned against relying on it. Warren Buffett and Charlie Munger of Berkshire Hathaway have been openly critical of EBITDA as a headline measure of performance. Their core objection is that depreciation, although a non-cash charge, reflects a very real economic cost: assets wear out and eventually have to be replaced with cash. Treating EBITDA as if it were earnings, in their view, ignores that cost and can flatter capital-intensive businesses.
Beyond depreciation, EBITDA ignores capital expenditure entirely, so a business that must constantly reinvest to stay competitive can post strong EBITDA while producing little free cash flow. It also ignores changes in working capital and the cost of servicing debt, both of which consume real cash. For these reasons EBITDA should be used as one comparison metric among several, alongside free cash flow, net income, capital expenditure and the balance sheet, and never as a standalone measure of how much a company truly earns.
Frequently Asked Questions About the EBITDA Calculator
Not necessarily. A higher EBITDA looks attractive, but because EBITDA adds back interest, taxes, depreciation and amortization, it ignores real costs such as capital expenditure, debt service and changes in working capital. A capital-intensive business can show strong EBITDA while generating little or no free cash flow once it pays to replace its equipment. EBITDA is most useful as one input alongside free cash flow, net income and the balance sheet, never on its own.
There is no universal benchmark. EBITDA margin (EBITDA divided by revenue) varies widely by industry, software and services tend to run high margins because they are asset-light, while retail, manufacturing and distribution typically run much lower margins. The only meaningful comparison is between companies in the same industry and at a similar stage. Comparing the EBITDA margin of a software firm to a grocery chain tells you little.
EV/EBITDA pairs enterprise value (the value of the whole business to all capital providers) with EBITDA (earnings available before financing and tax decisions). Because both the numerator and denominator are computed before the effects of capital structure and tax, the multiple lets you compare companies with different levels of debt and different tax situations on a more like-for-like basis than the price-to-earnings ratio.
Because net income contains things that operating income never touched. Interest and investment income, gains and losses on selling assets or whole businesses, one-off restructuring and legal charges, the share of profit from associates, and the profit that belongs to minority shareholders in subsidiaries all sit between operating income and the bottom line. So net income plus interest plus tax is rarely exactly equal to the operating income the company reports, and the two routes to EBITDA end up a little apart. Nothing is broken when that happens. Most analysts quote the figure built on reported operating income, and the size of the gap is itself informative: it shows how much of the bottom line came from outside ordinary trading.
Yes, and it often is for young or struggling companies. A negative EBITDA means the business was spending more to run its operations than it earned from them, before interest, tax and the non-cash charges were even considered. This calculator accepts negative figures for net income, operating income and tax (a loss-making company frequently reports a tax credit rather than a charge) and will show you a negative EBITDA rather than quietly turning it positive. Be aware that most EBITDA-based multiples, EV/EBITDA among them, stop carrying any meaning once EBITDA is negative.
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Educational use only. This tool provides estimates for informational purposes and does not constitute financial, investment, tax, or legal advice. Results are based on inputs you provide and mathematical models, they do not guarantee future performance. Always consult a qualified financial adviser before making investment decisions.