EBITDA Calculator

To calculate EBITDA, add interest, taxes, depreciation, and amortization back to net income. A business with $500,000 net income, $120,000 interest, $150,000 taxes, and $240,000 combined D&A has EBITDA of $1,010,000, a 33.7% EBITDA margin on $3,000,000 of revenue. This EBITDA calculator builds that figure from your income statement and computes the margin in one step; those are its default values.

Related tools cover the neighboring questions this one doesn't: the business valuation calculator turns earnings into an estimated price with multiples, the depreciation calculator builds the D&A schedule you add back here, and the profit margin calculator measures gross and net profit as a share of sales. EBITDA sits above net profit by stripping financing, tax, and non-cash charges out of operating earnings.

What EBITDA actually means

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It tries to answer a simple question: how much is the core business earning from operations, before the effects of how it is financed (interest), where it is taxed (taxes), and the non-cash spreading of past asset purchases (depreciation and amortization)? Because it removes those items, two companies with the same operations but different debt loads or tax situations can be compared more fairly than by net income alone.

The EBITDA formula

There are two common ways to calculate EBITDA, depending on where you start on the income statement:

The second version is shorter because operating income already excludes interest and taxes, so you only add back the two non-cash D&A charges. The margin is then:

Both formulas land on the same EBITDA when nothing else sits between operating income and net income. If the income statement also shows other non-operating items, such as investment income, a gain on selling equipment, or other income and expense, the two routes differ by those items. The SEC staff's definition starts from net income, so for a public company's EBITDA, or whenever you want to match a filing, use the net income route. This calculator lets you pick whichever starting point matches the figures you have on hand.

How to use this EBITDA calculator

You only need a few lines from an income statement. Work through the fields in order:

1. Choose a starting point: pick "Net income" if you have the bottom line, or "Operating income" if you already have EBIT.
2. Enter the earnings figure: net income (and its interest and taxes) for the first method, or operating income for the second.
3. Add depreciation and amortization: pull these from the cash flow statement or the notes; they are the non-cash charges being added back.
4. Enter revenue: this is optional for EBITDA itself but required to compute the EBITDA margin.
5. Read the results: the large number at the top is your EBITDA; below it you get the margin, a line-by-line build-up, and EBIT for reference.

The build-up panel shows exactly which items were added back, so you can sanity-check the math against your statements.

A worked example, step by step

Take the default figures: net income of $500,000. Add back $120,000 interest and $150,000 taxes to reach operating income (EBIT) of $770,000. Then add $180,000 depreciation and $60,000 amortization, $240,000 of D&A, to reach EBITDA of $1,010,000. Divide by $3,000,000 of revenue and you get an EBITDA margin of 33.7%. Notice that EBITDA ($1,010,000) is larger than EBIT ($770,000) by exactly the D&A you added back.

A second example: a capital-light business

Imagine a consulting firm with $1,200,000 revenue, $300,000 operating income, and only $20,000 of depreciation (a few laptops) and $0 amortization. Using the operating-income method, EBITDA = $300,000 + $20,000 = $320,000, a margin of about 26.7%. Because the firm owns almost no equipment, EBITDA and EBIT are nearly identical: there is very little to add back. This is the opposite of a manufacturer or telecom operator, where D&A can be a large share of EBITDA.

A third example: heavy depreciation

Now take a manufacturer with $5,000,000 revenue and just $150,000 operating income, but $700,000 depreciation on its factory and machines and $100,000 amortization of an acquired patent. EBITDA = $150,000 + $700,000 + $100,000 = $950,000, a margin of 19%, even though the EBIT margin is only 3%. The large gap is a warning sign: this business consumes a lot of capital, and the depreciation it adds back reflects real machines that will eventually need replacing.

EBITDA calculator examples: net income to EBITDA

Each row below runs the full add-back through the same formula this calculator uses (net income + interest + taxes = EBIT, then + D&A = EBITDA) for five hypothetical businesses. Every figure is computed, not taken from real companies; watch how the EBITDA margin can be far higher than the EBIT margin when depreciation is large.

The manufacturer and retailer earn almost identical EBIT margins (5.0% vs 5.1%) yet the manufacturer's EBITDA margin is more than double, purely because it adds back $800,000 of depreciation. That gap is the single most important thing an EBITDA figure can hide.

EBITDA percentage quick-reference

If you already know a company's EBIT margin and its depreciation and amortization as a share of revenue, its EBITDA margin is simply the sum of the two. This table answers the common "EBITDA percentage" and "EBITDA margin" lookups directly:

Read it as EBITDA margin = EBIT margin + D&A as a percent of revenue. A capital-heavy firm with a thin 5% EBIT margin but 15% D&A still posts a 20% EBITDA margin, which is exactly why EBITDA flatters capital-intensive businesses.

How business models shape EBITDA margins

EBITDA margins vary enormously between industries and from year to year, and published averages depend on which companies are counted, so this page does not quote "typical" margins. What you can predict is how a business model moves the gap between EBIT and EBITDA:

Notice that the businesses with the biggest gap are the ones whose EBITDA most overstates the cash they can spend: a high EBITDA margin does not always mean high cash generation.

EBIT vs EBITDA vs net income

These three profit measures sit at different points on the income statement:

• Net income is the true bottom line, after interest, taxes, and D&A. It reflects what owners actually keep.
• EBIT adds interest and taxes back to net income. It isolates operating performance but still subtracts D&A.
• EBITDA goes one step further and adds D&A back to EBIT, removing non-cash charges entirely.

Moving up that ladder makes each measure progressively less affected by financing, tax, and accounting choices, but also further from the cash the business actually keeps.

Who uses EBITDA, and why

• Buyers and sellers of businesses often price deals on EV/EBITDA multiples, so the EBITDA figure directly drives valuation.
• Lenders use debt-to-EBITDA to judge how much leverage a company can carry and write it into loan covenants.
• Private equity and LBO investors rely on EBITDA to compare targets with different debt and tax profiles.
• Founders and operators track EBITDA margin over time to see whether operating profitability is improving, and watch how a sale at a given multiple would feed their personal net worth.
• Analysts use it to compare peers with different tax and financing situations on a common basis.

EV/EBITDA: turning the number into a valuation

A common reason people calculate EBITDA is to value a business. The headline multiple is EV/EBITDA: enterprise value divided by EBITDA. Enterprise value is the market value of equity plus net debt (debt minus cash), so it captures what it would cost to buy the whole company outright, debt and all. Dividing by EBITDA produces a multiple that, unlike a price-to-earnings ratio, is unaffected by how the business is financed or taxed, which is why acquirers favor it.

Suppose a company has the EBITDA of $1,010,000 from the worked example above and comparable businesses have sold for about 8x EBITDA. That implies an enterprise value near $8,080,000. Subtract the company's net debt to get the equity value the owners would actually receive. The point of the multiple is comparison: a business priced at 4x EBITDA is cheaper per dollar of operating earnings than one priced at 9x, all else equal, but the right multiple for a given company comes from comparable sales, not from a rule of thumb. To pressure-test a return on the purchase price, pair the EBITDA figure with an ROI calculator, or estimate a small company's value with the business valuation calculator.

The table below applies a range of example multiples to the $1,010,000 EBITDA from the worked example, so you can see how the implied enterprise value scales:

Enterprise value is the whole-company price. The equity column subtracts an example $2,000,000 of net debt (total debt minus cash) to show what the owners would pocket. The multiples are examples for the arithmetic, not benchmarks for any company or industry.

Debt-to-EBITDA: how lenders read the number

Lenders care less about valuation and more about whether a borrower can service its debt. A workhorse ratio is debt-to-EBITDA, total debt divided by annual EBITDA, which roughly answers "how many years of operating earnings would it take to repay the debt?" There is no universal safe level; each lender sets the maximum it will accept based on the borrower's industry, cash flow stability and collateral, and higher leverage usually means higher interest rates or tighter terms.

Loan agreements frequently include a maximum leverage covenant expressed in these terms, for example "net debt must not exceed 3.5x trailing-twelve-month EBITDA." If EBITDA falls, the ratio rises, and a company can breach a covenant without ever missing a payment. That is one reason EBITDA volatility matters to creditors. If you are weighing what a new loan would cost against the earnings supporting it, the business loan calculator and the debt-to-income calculator approach the same affordability question from the financing side.

EBITDA and the business interest deduction

EBITDA also matters for tax planning. Under section 163(j) of the Internal Revenue Code, a business's deduction for business interest is generally limited to its business interest income plus 30% of its adjusted taxable income (ATI), plus floor plan financing interest. For tax years beginning in 2022 through 2024, ATI was figured after depreciation, amortization and depletion, so the cap worked like 30% of a tax-basis EBIT. The One, Big, Beautiful Bill (P.L. 119-21) restored the add-back for tax years beginning after December 31, 2024, so the limit again tracks something closer to a tax-basis EBITDA. Smaller businesses are generally exempt if their average annual gross receipts are at or below the inflation-adjusted threshold, which the IRS lists as $31 million for 2025 and $32 million for 2026. ATI is a tax figure, not your accounting EBITDA, so use Form 8990 or a tax professional for the exact amount.

Trailing vs forward EBITDA

EBITDA is always measured over a period, and which period you use changes the number. Trailing-twelve-month (TTM) EBITDA sums the most recent four quarters of actual results; it is backward-looking but based on reported figures, so it is hard to dispute. Forward EBITDA uses the next twelve months of forecast results; it reflects expected growth but depends on assumptions that may not hold. In deal documents you will also see run-rate EBITDA, which annualizes a recent strong period (for example, multiplying the latest quarter by four). Each can be legitimate, but they are not interchangeable: a seller naturally prefers the version that produces the largest number, so always confirm which basis a quoted multiple uses before comparing two deals.

How to find each input on the financial statements

If you are building EBITDA from a real set of statements rather than memory, here is where each piece lives:

• Revenue and net income sit at the top and bottom of the income statement, respectively.
• Interest expense appears as a separate line below operating income, often labeled "interest expense" or "finance costs."
• Income tax is the "provision for income taxes" line just above net income; use this, not the cash taxes paid.
• Operating income (EBIT) is usually a labeled subtotal on the income statement; if it is not, it equals revenue minus cost of goods sold and operating expenses.
• Depreciation and amortization are frequently buried inside cost of goods sold and operating expenses on the income statement, so the cleanest source is the cash flow statement, where D&A is added back to net income as a non-cash adjustment.

Pulling D&A from the cash flow statement rather than guessing is the single most reliable way to avoid an understated EBITDA. Public companies' annual reports on Form 10-K contain all of these statements; the SEC's investor bulletin on reading a 10-K explains where to find them.

EBITDA and core profitability calculators

EBITDA tells you about operating earnings, but it sits alongside simpler profitability measures you may also need. Gross and net profit as a share of sales come from a profit margin calculator; the spread between cost and selling price is handled by the margin calculator and the markup calculator. If you want to know the sales volume at which the business simply covers its fixed and variable costs, the break-even calculator answers that directly. EBITDA layers on top of these by stripping financing, tax, and non-cash charges out of the picture.

Key terms explained

• Depreciation: the periodic, non-cash expensing of tangible assets (buildings, machines, vehicles) over their useful lives.
• Amortization: the same idea for intangible assets such as patents, software, customer lists and other acquired intangibles.
• Operating income (EBIT): profit from core operations before interest and taxes.
• EBITDA margin: EBITDA as a percentage of revenue, a measure of operating profitability.
• Adjusted EBITDA: EBITDA with extra one-off or non-operating items removed; useful but easy to abuse.
• EV/EBITDA: enterprise value divided by EBITDA, a common valuation multiple built on this metric.

The limits of EBITDA

EBITDA is useful but easy to misread. The central criticism is that depreciation is a real economic cost (the machines do wear out), so ignoring it flatters capital-heavy businesses. Keep these limits in mind:

• It ignores capital expenditures, which can consume most of the cash a capital-intensive firm generates.
• It ignores working-capital swings, so a profitable-looking company can still run out of cash.
• It is not a GAAP measure, so definitions differ between companies; always read the reconciliation to net income.
• Adjusted versions can pile on discretionary add-backs that overstate normalized earnings.

Use EBITDA alongside free cash flow and net income, never on its own.

Related metrics and calculators

EBITDA answers "what does the core business earn before financing, tax, and non-cash charges?" Other questions need other tools:

• To put a price on a small business from its earnings, use the Business Valuation Calculator.
• To find the discount rate for valuing future cash flows, use the WACC Calculator.
• For gross and net profitability as a percentage of sales, use the Profit Margin Calculator.
• To find the sales level that covers all costs, use the Break-Even Calculator.
• To judge the return on a price paid for a business, use the ROI Calculator.
• To size the financing behind a deal, use the Business Loan Calculator.

Sources

• U.S. Securities and Exchange Commission (SEC): Non-GAAP Financial Measures: Compliance & Disclosure Interpretations (Questions 103.01 and 103.02: EBITDA starts from GAAP net income, is reconciled to net income, and differently calculated measures need a different name).
• Electronic Code of Federal Regulations: 17 CFR 244.100, Regulation G (present the comparable GAAP measure, reconcile, and do not mislead).
• Internal Revenue Service (IRS): Questions and answers about the limitation on the deduction for business interest expense (30% of adjusted taxable income; depreciation add-back restored for tax years beginning after December 31, 2024; $31 million and $32 million gross receipts thresholds).
• U.S. Securities and Exchange Commission (SEC): Investor Bulletin: How to Read a 10-K (where the income statement, cash flow statement and notes appear in annual reports).