EBITDA Margin Calculator
Build EBITDA from net income by adding back interest, taxes, depreciation and amortization, then express it as a margin on revenue.
How it works
EBITDA = net income + interest + taxes + depreciation + amortization · EBITDA margin % = EBITDA ÷ revenue × 100
EBITDA adds back to net income the four items it excludes — interest, taxes, depreciation and amortization — to approximate the cash a business throws off from operations before financing, tax and accounting for asset wear. Expressed as a margin on revenue, it lets you compare operating profitability across companies with different debt loads, tax situations and capital bases. Its blind spot is exactly those add-backs: heavy real capital expenditure and interest are real costs that EBITDA ignores.
Worked example
From $120,000 net income, add $30,000 interest, $40,000 taxes, $50,000 depreciation and $10,000 amortization for $250,000 EBITDA. On $1,000,000 revenue that is a 25% EBITDA margin.
Frequently asked questions
Why add back depreciation and amortization?
They are non-cash accounting charges for the gradual expensing of assets already bought. Adding them back approximates operating cash generation, though it can flatter businesses that must keep reinvesting heavily in equipment.
What is a good EBITDA margin?
It is highly industry-dependent — asset-light software firms can exceed 40% while distribution and retail run in single digits. Use it to compare similar companies and to track a single company over time.
Why is EBITDA criticized?
Because it excludes real costs — capital expenditure, interest and taxes all eventually consume cash. A company can show strong EBITDA yet struggle to fund debt payments or reinvestment, so pair it with free cash flow.
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Educational estimate, not financial advice.