EBITDA Calculator

This calculator works up from net income to EBITDA by adding back the four items that depend on financing, tax position and accounting choices rather than day-to-day operations. It shows EBITDA, EBITDA margin, the total of the add-backs, the net profit margin for comparison, and an illustrative value at 5× EBITDA.

All the inputs come from one income statement for the same period. Use income tax expense only — payroll, sales and property taxes are operating costs and stay in. Depreciation and amortization are sometimes buried in cost of sales or operating expenses; the cash flow statement lists the total D&A figure if you cannot find it.

EBITDA is widely used to compare companies with different debt levels and to value businesses, but it is not cash flow. It ignores the cost of replacing equipment, changes in working capital and the interest and tax you actually pay. For the valuation step, use the business valuation calculator, which lets you choose the multiple and adjust for cash and debt.

EBITDA is not defined by US GAAP or IFRS, so companies calculate it slightly differently; the SEC requires public companies that report it to reconcile it to net income. Adjusted EBITDA also adds back one-off items such as restructuring or legal settlement costs, and for owner-run businesses any above-market owner pay. Be skeptical of long lists of adjustments.

Using the first example's income statement, each line removes one item from the bottom up. Operating income (EBIT) is the point at which only operating costs have been deducted.

• Capital expenditure: depreciation is added back, but trucks, machines and computers still have to be replaced. EBITDA minus capex is a closer guide to cash generation for asset-heavy businesses.
• Working capital: growing businesses tie up cash in inventory and customer invoices, which EBITDA does not show.
• Interest and tax: they are real cash costs. A business with high EBITDA but heavy debt can still struggle to pay its bills.
• Lease costs: under IFRS 16 (and for finance leases under US GAAP), lease costs appear as depreciation and interest and get added back, so EBITDA looks higher than for a business whose rent sits in operating expenses.

Use the depreciation calculator to see how much of the add-back is ongoing wear and tear.

EBITDA margin shows operating profitability before capital structure, so it is the fairer way to compare two businesses where one is debt-financed and the other is not. Compare it with companies in the same industry: software and asset-light services often show much higher margins than retail, distribution or construction. For trends within your own business, track EBITDA margin alongside gross and net margin from the profit margin calculator — if gross margin holds but EBITDA margin falls, overheads are growing faster than sales.