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EBITDA Calculator
See the earning power of the business itself. Add back interest, taxes, depreciation, and amortization to net income to get EBITDA — and, with revenue, your EBITDA margin — the figure buyers, lenders, and investors reach for first.
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→ Operating earnings
Why buyers and lenders start with EBITDA
EBITDA strips out financing, tax, and non-cash charges to show the cash-generating power of the core business — which is why it anchors most valuations (as a multiple) and loan covenants. Your 24.0% EBITDA margin is what an acquirer would normalize and multiply. It is not free cash flow, though: it ignores capex and working capital.
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Calculations run entirely in your browser. Figures are estimates for planning, not financial advice.
What EBITDA strips out, and why
EBITDA takes bottom-line profit and adds back four things that say more about a company's history and structure than its operations: interest (how it's financed), taxes (its jurisdiction and structure), and depreciation and amortization (non-cash charges from past spending). What's left is a clean-ish view of the cash the core business throws off — the reason it's become the default lens for comparing companies and pricing deals.
The build-up
- EBITDA = net income + interest + taxes + depreciation + amortization
- EBITDA margin = EBITDA ÷ revenue
A business earning $200,000 of net income with $40,000 interest, $60,000 taxes, $50,000 depreciation, and $10,000 amortization has an EBITDA of $360,000. On $1.5Mof revenue, that's a 24% EBITDA margin — the figure an acquirer would normalize and apply a multiple to.
EBITDA and business value
Most private businesses are bought and sold on a multiple of EBITDA, so raising EBITDA — or the multiple applied to it — is how owners build equity value. That's why the number gets “normalized” before a sale: adding back owner-specific and one-time costs to show the true, transferable earning power. See how the multiple works in the business valuation calculator, and derive the discount rate for a cash-flow valuation with the WACC calculator.
Its limits: EBITDA is not cash flow
EBITDA's great strength — ignoring capital structure and non-cash charges — is also its blind spot. It leaves out the capital expenditures needed to keep the business running, the swings in working capital, and the interest and taxes actually paid. A capital-heavy business can post strong EBITDA and slim free cash flow. Use EBITDA to compare operating performance and anchor a valuation, but never mistake it for the cash the business keeps.
→ Beyond the calculator
Valuing or selling the business?
A clean, normalized EBITDA is what a valuation multiplies. We build the normalized earnings, add-backs, and projections that stand up to a buyer's or lender's diligence.
Frequently asked questions
- EBITDA = net income + interest + taxes + depreciation + amortization. You start with bottom-line profit and add back the four items that obscure the operating performance of the business: financing costs (interest), tax, and the two non-cash charges (depreciation and amortization). The result approximates the cash the core operations generate.
- EBITDA margin = EBITDA ÷ revenue, as a percentage. It shows how much operating cash flow each dollar of sales produces, independent of how the company is financed or taxed — which makes it useful for comparing businesses of different sizes and capital structures. A higher margin generally signals a more efficient, more valuable operation.
- Because it isolates the earning power of the business itself. Interest depends on how much debt the owner took on, taxes on their structure, and depreciation on past capital choices — none of which a buyer inherits directly. Stripping them out lets an acquirer value the operation on a like-for-like basis, which is why most deals are priced as a multiple of EBITDA and many loan covenants are set against it.
- EBITDA is a proxy for operating cash flow, not the real thing. It ignores capital expenditures (the money spent to maintain and grow the asset base), changes in working capital, and actual taxes and interest paid. A capital-intensive business can show healthy EBITDA and thin free cash flow. Use EBITDA to compare operating performance, but look at cash flow to see what the business actually keeps.
- Yes — it runs in your browser, nothing is stored, and there's no sign-up. When you're valuing a business or preparing for a sale or raise, our financial modeling service builds the normalized earnings and projections behind the number.