How to use the EBITDA calculator
Choose the tab that matches the figures you have.
- From net income takes the bottom line of the income statement. Enter net income (negative for a loss), interest expense, income taxes, depreciation and amortization. If depreciation is not on the income statement, find it in the cash flow statement.
- From operating income is shorter: enter operating profit (EBIT) and the depreciation and amortization included in it.
- Revenue turns EBITDA into a margin. Use sales for the same period.
- Adjustments are optional. List non-recurring costs to add back for adjusted EBITDA, and one-off gains as negative amounts. Set the amounts to 0 if you only want plain EBITDA.
The chart and the bridge table show each step, with every line as a share of revenue.
The formula
EBITDA = Operating profit (EBIT) + Depreciation + Amortization
EBITDA margin = EBITDA ÷ Revenue
Adjusted EBITDA = EBITDA + One-off costs − One-off gainsEBIT is earnings before interest and taxes. Depreciation spreads the cost of physical assets over their useful life; amortization does the same for intangible assets such as software or acquired customer lists. Neither is a cash payment in the year it is recorded.
A worked example
Company B had $5,000,000 of revenue and a net income of $400,000. It paid $120,000 of interest and recorded $110,000 of income tax, so operating profit was $630,000, an EBIT margin of 12.6%.
Adding back $250,000 of depreciation and $50,000 of amortization gives EBITDA of $930,000 and an EBITDA margin of 18.6%.
The year also included a legal settlement and severance costs that will not recur, $100,000 in total. Adding them back gives adjusted EBITDA of $1,030,000, a margin of 20.6%. EBITDA is 7.8× the interest bill.
What EBITDA shows and what it hides
EBITDA puts companies with different financing on the same footing. Suppose Company C has the same operations as Company B but much more debt:
| Company B | Company C (more debt) | |
|---|---|---|
| Interest expense | $120,000 | $320,000 |
| Net income | $400,000 | $250,000 |
| Net profit margin | 8.0% | 5.0% |
| EBITDA | $930,000 | $930,000 |
| EBITDA margin | 18.6% | 18.6% |
Net income says Company B is the better business. EBITDA says the operations are identical and the difference is financing, which is exactly why lenders and buyers start from it.
The same feature is also its weakness. EBITDA ignores the cost of the assets a business needs. A company with $330,000 of operating profit and $600,000 of depreciation also shows $930,000 of EBITDA, the same as Company B, but it writes off twice as much equipment each year, and that equipment has to be replaced with real cash. Its EBIT margin is 6.6%, against 12.6% for Company B. For capital-intensive businesses, check EBIT and free cash flow alongside EBITDA.
Adjusted EBITDA: use with care
Adjustments are legitimate when a cost truly will not happen again, such as a one-time lawsuit or the cost of moving premises. In private company sales, the part of an owner’s salary above a market wage is often added back too. But adjusted EBITDA has no official definition, and it is easy to stretch:
- Recurring “one-offs.” Restructuring charges that appear every year are a cost of doing business.
- Stock-based compensation. Adding it back treats employee pay as if it were free.
- Projected savings. Cost cuts that have not happened yet are a forecast, not earnings.
The calculator warns when adjustments exceed a quarter of adjusted EBITDA. That is not a rule, only a point at which a buyer or lender will almost certainly question each item.
What this calculator does not include
The calculator adds up the figures you enter; it cannot tell whether they are classified consistently. Interest income, gains on asset sales and other non-operating items affect EBITDA if they sit inside net income, so remove them through the adjustments if you want a pure operating figure. It does not estimate working capital, capital expenditure or cash taxes, which are the gap between EBITDA and the cash a business actually generates.