This all-in-one online EBITDA Calculator finds your business earnings before interest, taxes, depreciation and amortization (EBITDA) as operating profit minus operating expenses, excluding taxes and interest. You can enter the values of any three known parameters in the input fields of this calculator and find the missing parameter.
Definition of EBITDA
The earnings before interest, taxes, depreciation, and amortization (EBITDA) is a measure of a company’s overall financial performance and is used to determine the earning potential of a company. The formula for EBITDA is as follows:
EBITDA = Operating profit + Amortization + Depreciation
Operating profit is a company’s profit after subtracting operating expenses or the costs of running the daily business. Actually, it is done by excluding interest and taxes. So, we can rewrite the above formula using another key indicator: EBIT – earnings before interest and taxes (see our EBIT Calculator).
EBITDA = EBIT + Amortization + Depreciation
In practice, EBITDA is often used to compare companies against each other and with the average financial performance of the industry. This is a good indicator of core profit dynamics, as it removes some extraneous factors and allows for more accurate comparisons between companies.
There is no such thing as “good” EBITDA because, like most financial metrics, it all depends on the company and the industry. By itself, EBITDA does not indicate how profitable a company is, unless you compare the performance of the same company over different periods.
However, it should be emphasized that EBITDA does not fall under Generally Accepted Accounting Principles (GAAP) as a measure of financial performance. Since EBITDA is not a GAAP measure, its calculation can vary from company to company. Companies often focus on EBITDA over net income because it is more flexible and can distract from other areas of concern in financial reporting.
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