EBITDA Margin Calculator
EBITDA margin is one of the most widely used metrics in business valuation, merger analysis, and financial benchmarking. By excluding interest, taxes, depreciation, and amortisation, EBITDA attempts to isolate the cash-generating power of a company's core operations, independent of how it is financed or taxed. This makes it useful for comparing businesses with different capital structures or in different tax jurisdictions. Enter your revenue and income statement items below to calculate both EBITDA and the EBITDA margin.
EBITDA margin formula
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortisation
EBITDA Margin = EBITDA / Revenue * 100
Example: Net Income $200,000 + Interest $50,000 + Taxes $80,000 + D&A $120,000 = EBITDA $450,000. Revenue $2,000,000. EBITDA Margin = $450,000 / $2,000,000 = 22.50%.
EBITDA in business valuation
- Private equity buyers often value businesses as a multiple of EBITDA (for example, 5x to 8x EBITDA for small businesses).
- Lenders use EBITDA to calculate debt service coverage ratios and maximum leverage.
- An improving EBITDA margin over time demonstrates operational leverage: revenue grows faster than costs.
- Adjusted EBITDA excludes one-time items such as restructuring charges or legal settlements for a cleaner baseline.
Frequently asked questions
What does EBITDA stand for?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. It is a measure of a company's core operational profitability, stripping out items that vary based on financing structure, tax jurisdiction, and accounting choices.
What is the EBITDA margin?
EBITDA margin is EBITDA divided by total revenue, expressed as a percentage. It shows how much of each revenue dollar is turned into operating cash earnings before capital costs. It is widely used to compare companies across industries and capital structures.
How do I calculate EBITDA from an income statement?
Start with net income, then add back interest expense, income taxes, depreciation, and amortisation. Alternatively, start with operating income (EBIT) and add back depreciation and amortisation. Both methods give the same result.
Is EBITDA the same as cash flow?
EBITDA approximates operating cash flow but is not identical. It does not account for changes in working capital (receivables, payables, inventory) or capital expenditures. Free cash flow is a more complete picture of cash generation.
What is a good EBITDA margin?
EBITDA margins vary widely by industry. Software companies often exceed 30-40%. Service businesses may be 15-25%. Retailers and grocers often have single-digit EBITDA margins. Always compare to industry peers rather than a universal threshold.
Official sources
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.