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# EBITDA Margin Calculator

Via EBITDA
Via EBIT
Via Net Income

%

## What is EBITDA & EBITDA Margin

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It’s a measure used to evaluate a company’s operational profitability. It removes the effects of financing and accounting decisions by adding back all relative components cut out from the income. The formula for EBITDA is:

EBIT = Net Income + Interest + Taxes

EBITDA = EBIT + Depreciation + Amortization

(Thus, in method 3 of this EBITDA Margin calculator, we directly calculate EBITDA as: EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization)

Here’s a simple breakdown of the components:

1. Net Income: The profit a company earns after deducting all expenses from its revenue.
2. Interest: The cost incurred from the company’s debt.
3. Taxes: The amount paid to tax authorities.
4. Depreciation: The reduction in value of tangible assets like machinery over time.
5. Amortization: The reduction in value of intangible assets like patents over time.

EBITDA Margin is calculated by dividing EBITDA by the total revenue, then multiplying by 100%. The formula is:

EBITDA Margin = (EBITDA / Total Revenue) × 100%

EBITDA Margin transforms the absolute EBITDA figure into a relative measure, allowing stakeholders to better compare a company’s operational efficiency over time or against other firms. A higher EBITDA Margin denotes a more operationally efficient and potentially more financially stable company.

## EBITDA Margin Calculation Example

Let’s consider two hypothetical companies, Alpha Corp and Beta Ltd, to elucidate the practical utility of the EBITDA Margin calculation.

Financial Figures for the Year:

Alpha Corp:

Net Income: $600,000 Interest:$40,000

Taxes: $100,000 Depreciation:$50,000

Amortization: $30,000 Total Revenue:$2 million

Beta Ltd:

Net Income: $800,000 Interest:$70,000

Taxes: $200,000 Depreciation:$100,000

Amortization: $50,000 Total Revenue:$5 million

We’ll begin by calculating EBITDA for both companies using the formula:

EBIT = Net Income + Interest + Taxes

EBITDA = EBIT + Depreciation + Amortization

Alpha Corp:

EBIT = $600,000 +$40,000 + $100,000 =$740,000

EBITDA = $740,000 +$50,000 + $30,000 =$820,000

Beta Ltd:

EBIT = $800,000 +$70,000 + $200,000 =$1,070,000

EBITDA = $1,070,000 +$100,000 + $50,000 =$1,220,000

Now, let’s calculate the EBITDA Margin using the formula:

EBITDA Margin = (EBITDA / Total Revenue) × 100%

Alpha Corp:

EBITDA Margin = (820,000 / 2,000,000) × 100% = 41%

Beta Ltd:

EBITDA Margin = (1,220,000 / 5,000,000) × 100% = 24.4%

In this scenario, Alpha Corp exhibits a higher EBITDA Margin, indicating better operational efficiency and profitability per revenue dollar than Beta Ltd.

That’s why we posted this EBITDA Margin calculator: to quickly help you view the operational profitability of companies relative to their revenue.

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