EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is one of the most widely used profitability numbers in business — investors, lenders, buyers, and owners all lean on it because it strips out financing decisions, tax choices, and accounting conventions to reveal the raw cash-generating performance of a company's core operations. This free EBITDA calculator starts at the top of the income statement: enter your revenue, cost of goods sold, and cash operating expenses, and it returns your EBITDA dollar figure, your EBITDA margin, and — when you enter enterprise value — the EV/EBITDA valuation multiple buyers use.
Adjust any field and every result updates instantly. Because EBITDA sits one level above operating income on the income statement, it is often the number bankers and acquirers multiply by a valuation multiple to decide what a business is worth. Getting it right — and understanding what it does and does not tell you — matters.
How to Use
- Enter your Total Revenue — the top line for the period you want to measure (usually a full year or the trailing twelve months). Use net revenue, after returns and allowances.
- Enter Cost of Goods Sold (COGS) — the direct costs of producing what you sold: materials, factory labor, and wholesale purchases for resale.
- Enter Operating Expenses (excl. D&A) — your cash SG&A: payroll, rent, marketing, software subscriptions, and travel. Do not include depreciation or amortization here.
- Enter Depreciation & Amortization — the non-cash expense that spreads the cost of fixed assets and intangibles over their useful life. This line is shown separately so you can see how much of your EBITDA is real cash flow versus accounting add-back.
- Optionally enter Enterprise Value — market capitalization plus debt minus cash. When you do, the calculator divides it by EBITDA to show the EV/EBITDA multiple, the headline number in most M&A and comps analyses.
The highlighted result is your EBITDA. Below it, EBIT (Operating Income) subtracts D&A to show your accounting operating profit, and EBITDA Margin expresses EBITDA as a percentage of revenue — how you compare your business against peers of any size.
The EBITDA Formula
The top-down build from the income statement is the textbook definition:
EBITDA = Revenue − COGS − Operating Expenses (excl. D&A)
Where:
- Revenue is the top-line sales for the period.
- COGS is the direct cost of the goods or services sold.
- Operating Expenses are cash SG&A, marketing, and payroll — excluding depreciation and amortization.
Once you have EBITDA, two derived numbers matter:
EBIT = EBITDA − Depreciation & Amortization. This is operating income (the accounting profit after non-cash charges). It is what appears on a standard income statement below gross profit.
EBITDA Margin = EBITDA ÷ Revenue × 100. This expresses operating profitability as a percentage of sales, letting you compare a $500,000-a-year shop against a $500-million-a-year public company on the same scale.
EV/EBITDA = Enterprise Value ÷ EBITDA. This is the valuation multiple. If a business is bought for 6× EBITDA, the buyer paid six years of that operating earnings stream to acquire it.
Worked example on a company with $1,000,000 in revenue, $400,000 in COGS, $200,000 in cash operating expenses, and $100,000 in depreciation and amortization: EBITDA = $1,000,000 − $400,000 − $200,000 = $400,000. The EBITDA margin is 40.0%. Subtracting D&A gives EBIT of $300,000. With an enterprise value of $2,400,000, the EV/EBITDA multiple is 6.0×.
If revenue is zero, the margin is mathematically undefined (you cannot divide by zero), so the engine leaves it blank rather than guessing. If you enter a negative revenue, the calculator rejects the input, because recorded revenue should never be below zero.
Why Strip Out D&A, Interest, and Taxes?
Each adjustment removes a choice or convention that has nothing to do with how well the core business runs:
- Depreciation and amortization reduce reported profit, but they do not move a single dollar of cash out the door in the period they are booked. A company that bought a $120,000 machine may expense $20,000 a year for six years, yet the cash actually left the bank on day one. Adding them back shows the cash-generating reality.
- Interest depends on how the owner chose to fund the company (debt vs. equity). Two identical operations can show very different net incomes purely because one borrowed more.
- Taxes depend on jurisdiction, structure, and tax-planning choices, not operating performance.
By starting from revenue and stopping before interest and taxes, EBITDA focuses on the cash a business generates from operations before it has to service debt, pay the tax authority, or fund asset replacements. This is exactly why lenders and buyers like the metric: it levels the playing field between levered and unlevered, taxed and untaxed, capital-intensive and asset-light businesses. It is also why valuation discussions so often sound like "we will do six times EBITDA" — the multiple is applied to a figure that is meant to be comparable across firms.
That said, EBITDA is not a substitute for cash flow. It ignores the very real future cost of replacing worn-out equipment, and it can flatter companies with heavy capital spending. Treat it as one lens, not the whole picture.
Examples
Example 1 — A profitable services firm. A design studio books $1,000,000 in annual revenue, spends $400,000 on contractors and software delivery (COGS), runs $200,000 in cash operating expenses (rent, marketing, owner payroll), and records $100,000 in depreciation on its computers and purchased software license. EBITDA is $400,000, a 40.0% margin. EBIT is $300,000. At an enterprise value of $2,400,000, the implied EV/EBITDA multiple is 6.0× — right in the range for a mature small services business.
Example 2 — A high-revenue manufacturer. A factory does $10,000,000 in revenue, with $4,000,000 in direct materials and labor, $2,000,000 in cash operating expenses (management salaries, utilities, sales), and $1,000,000 in depreciation on plant. EBITDA works out to $4,000,000, a 40.0% margin. With an enterprise value of $60,000,000 the multiple is 15.0× — typical for a high-growth public industrial. Because revenue exceeds $1,000,000, this case also shows the calculator handles large magnitudes without rounding errors.
Example 3 — A loss-making growth company. An early-stage SaaS startup turns over $2,000,000, spends $1,500,000 on cloud hosting and support (COGS), runs $800,000 in sales and marketing spend, and records $100,000 in amortization of acquired patents. EBITDA is −$300,000, a −15.0% margin. The negative number tells investors the core operations are still burning cash even before financing and tax — a useful early-warning sign, and one this calculator surfaces honestly rather than clipping to zero.
FAQ
How do I calculate EBITDA?
Use the formula EBITDA = Revenue − COGS − Operating Expenses (excluding depreciation and amortization). Start from your top-line revenue, subtract the direct cost of what you sold, then subtract cash operating expenses like payroll, rent, and marketing. The result is your EBITDA. This calculator does all the arithmetic for you instantly.
What is a good EBITDA margin?
EBITDA margin = EBITDA ÷ Revenue × 100. A 15–20% margin is solid for many industries, 20–30% is strong, and above 30% is excellent — but benchmarks vary widely. Software and digital media businesses often run 60%+ margins, while retail and restaurants commonly land in the 5–12% range. Always compare your margin against direct competitors, not against a single national average.
What is a normal EV/EBITDA multiple?
EV/EBITDA = Enterprise Value ÷ EBITDA. Mature small businesses often sell at 3× to 6× EBITDA, while high-growth public companies in software can trade at 15×, 20×, or more. A low multiple suggests the market sees slow growth or risk; a high multiple implies expected expansion. Compare the multiple against peers in the same sector, because averages across industries are not meaningful.
Is EBITDA the same as operating profit?
No. EBIT (operating income) is revenue minus COGS and operating expenses, including depreciation and amortization. EBITDA goes one step further and adds those non-cash charges back, so EBITDA = EBIT + Depreciation + Amortization. On this calculator, EBIT is shown as a separate output line right below EBITDA so you can see the difference.
Why do buyers and lenders use EBITDA?
Because it strips out differences in how companies are financed, taxed, and depreciated, making businesses easier to compare. A buyer will often offer a price based on a multiple of EBITDA — for example 5× to 7× for mature small businesses. Lenders use it to judge whether a company generates enough operating earnings to cover debt repayments. Just remember it is a proxy for cash flow, not actual cash in the bank.
Can EBITDA be negative?
Yes. If your cash operating expenses plus COGS exceed revenue, EBITDA is negative, which means the core business is losing money even before financing or tax effects. A negative EBITDA is a serious warning sign for mature businesses, though early-stage growth companies deliberately run at a loss while scaling. Note that this calculator itself rejects a negative revenue figure, since recorded revenue cannot be negative.
Disclaimer
This EBITDA calculator is provided for informational purposes only and does not constitute financial, accounting, tax, or investment advice. Results are based on the inputs you enter and the standard EBITDA formula; real financial statements may classify certain costs differently, and add-backs such as stock-based compensation or one-time items are not adjusted here. EV/EBITDA multiples are illustrative and depend heavily on industry, growth rate, and risk. Always confirm your figures with a qualified accountant or financial advisor before making business, lending, or valuation decisions.