All business calculators · EBITDA meaning, formulas and limitations
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Use the same reporting period and currency for all inputs. Dollar amounts are displayed in CAD, following the site's calculator convention. Defaults are fictional, illustrative assumptions, not typical business figures.
Exclude interest and income tax expense from operating expenses. Keep payroll and property taxes in operating costs. Enter each cost only once, in either cost of goods sold or operating expenses. Optional depreciation and amortisation fields treat a blank as zero.
What EBITDA is and is not
EBITDA means earnings before interest, taxes, depreciation and amortisation. It measures earnings before financing costs, income tax expense and those non-cash asset charges. It is not net profit or cash flow, and it does not show cash available to owners or prove that debt is affordable. It is not a standardised GAAP measure; disclose your definition and reconcile it to the financial statements.
Formula and assumptions
EBITDA = Revenue − Cost of goods sold − Operating expenses + Depreciation + Amortisation, when the entered costs already include those depreciation and amortisation charges.
EBITDA margin (%) = EBITDA ÷ Revenue × 100. Margin is undefined when revenue is zero. If costs exclude depreciation and amortisation, EBITDA = Revenue − Cost of goods sold − Operating expenses, without any add-back.
- Select one period and take revenue, cost of goods sold and operating expenses from the same income statement or forecast.
- Subtract both cost categories from revenue, excluding interest and income tax expense.
- Add back only depreciation and amortisation already deducted in those costs. Confirm the checkbox matches your accounting treatment.
- Divide EBITDA by revenue and multiply by 100 to calculate the margin.
An alternative reconciliation starts with net income and adds interest, income taxes, depreciation and amortisation. Non-operating gains or losses can cause the routes to differ; review them separately. See the full EBITDA explainer for the reconciliation.
Worked example — illustrative only
A fictional business has $500,000 revenue, $200,000 cost of goods sold and $220,000 operating expenses, including $15,000 depreciation and $5,000 amortisation across the two cost categories.
EBITDA = $500,000 − $200,000 − $220,000 + $15,000 + $5,000 = $100,000. EBITDA margin = $100,000 ÷ $500,000 × 100 = 20%.
If both cost categories already excluded those charges, their combined total would instead be $400,000. With the checkbox unchecked, EBITDA would still be $100,000. These numbers are illustrative only, not a forecast or industry benchmark.
When lenders and investors use EBITDA
Lenders may use EBITDA as a starting point for assessing operating performance and debt-service capacity. They also review cash flow, working capital, capital expenditure, existing debt and their own covenant definitions. Investors and buyers may compare EBITDA margins or valuation multiples across comparable businesses, after checking that accounting definitions and adjustments align. EBITDA alone does not determine loan approval or business value.
Common mistakes
- Adding depreciation or amortisation back when it was never deducted, or counting a cost in both cost categories.
- Mixing monthly revenue with annual expenses, or mixing currencies.
- Including interest and income tax expense in operating costs, or removing ordinary payroll and property taxes.
- Treating equipment purchases, debt principal payments or working-capital movements as EBITDA expenses; assess them in the cash-flow forecast.
- Calling extra discretionary add-backs ordinary EBITDA without a separate adjusted EBITDA reconciliation.
- Treating a positive EBITDA result as proof of positive cash flow.
Frequently asked questions
Is EBITDA the same as cash flow?
No. EBITDA excludes interest, income taxes, depreciation and amortisation. It does not capture working-capital movements, capital expenditure or debt principal repayments.
What if my costs already exclude depreciation and amortisation?
Uncheck the costs-inclusion box. The calculator then subtracts cost of goods sold and operating expenses from revenue without adding depreciation or amortisation back.
Can EBITDA be negative?
Yes. EBITDA is negative when operating costs excluding depreciation and amortisation exceed revenue. With zero revenue, EBITDA margin is undefined.
Does this calculate adjusted EBITDA?
No. This calculator makes no additional adjustments for owner compensation, one-off costs or other items. Disclose and reconcile any adjusted EBITDA separately.
What is a good EBITDA margin?
There is no universal target. Compare consistent definitions within the same industry and business model, and review cash flow alongside the margin.