Enter the revenue value in the selected currency.
Enter the operating expenses value in the selected currency.
Enter the depreciation value in the selected currency.
Enter the amortization value in the selected currency.
History:

Explanation

What is EBITDA?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a financial metric used to evaluate a company’s operating performance. By focusing on earnings generated from core business operations, EBITDA provides a clearer view of profitability without the influence of capital structure, tax rates, and non-cash accounting items.

How to calculate EBITDA?

EBITDA can be calculated using the following formula:

EBITDA is calculated as:

§§ \text{EBITDA} = \text{Revenue} - \text{Operating Expenses} - \text{Depreciation} - \text{Amortization} §§

where:

  • § \text{EBITDA} § — Earnings Before Interest, Taxes, Depreciation, and Amortization
  • § \text{Revenue} § — Total income generated from sales or services
  • § \text{Operating Expenses} § — Costs incurred in the normal course of business operations
  • § \text{Depreciation} § — Reduction in the value of tangible fixed assets over time
  • § \text{Amortization} § — Gradual write-off of intangible assets over their useful life

Example:

Let’s say a company has the following financial figures:

  • Revenue: $200,000
  • Operating Expenses: $80,000
  • Depreciation: $20,000
  • Amortization: $10,000

Using the formula:

§§ \text{EBITDA} = 200,000 - 80,000 - 20,000 - 10,000 = 90,000 §§

Thus, the EBITDA for this company is $90,000.

When to use the EBITDA Calculation Calculator?

  1. Financial Analysis: Assess the operational profitability of a business without the effects of financing and accounting decisions.

    • Example: Investors can use EBITDA to compare the profitability of companies in the same industry.

  2. Valuation: Determine the value of a business based on its earnings potential.

    • Example: EBITDA is often used in valuation multiples, such as EV/EBITDA.

  3. Performance Tracking: Monitor changes in operational performance over time.

    • Example: Businesses can track EBITDA quarterly to evaluate growth or decline.

  4. Budgeting and Forecasting: Help in creating budgets and financial forecasts based on expected earnings.

    • Example: Companies can project future EBITDA based on historical data.

  5. Loan Applications: Lenders may require EBITDA figures to assess a company’s ability to repay loans.

    • Example: A business applying for a loan may present its EBITDA to demonstrate financial health.

Practical examples

  • Startups: A new business can use this calculator to project its EBITDA as it grows, helping to attract investors.
  • Established Companies: A company can analyze its EBITDA over several years to identify trends and make strategic decisions.
  • Mergers and Acquisitions: Potential buyers can evaluate EBITDA to determine the attractiveness of a target company.

Definitions of Terms Used in the Calculator

  • Revenue: The total amount of money received by a company for goods sold or services provided during a specific period.
  • Operating Expenses: The costs associated with running a business’s core operations, excluding costs related to financing and taxes.
  • Depreciation: The accounting method of allocating the cost of a tangible asset over its useful life.
  • Amortization: The process of gradually writing off the initial cost of an intangible asset over a period.

Use the calculator above to input different values and see the EBITDA change dynamically. The results will help you make informed decisions based on the operational profitability of the business you are analyzing.