EBITDA calculator is a financial metric used to analyze the company’s overall performance in a given year. It provides a holistic idea of the company’s business at an operational level to every investor. The EBITDA calculator is also used as a level playing field to compare companies at an operational level and ascertain their net income.
So what is EBITDA? The acronym stands for Earnings before Interest, Tax, Depreciation and, Amortization. It simply means the net income (earnings) after subtracting it from the operational expenses. Operating expenses refer to the total revenue, cost of goods sold and, other expenses such as admin, marketing, and sales expenses. Upon considering these figures, you’ll get the EBITDA of a company. EBITDA, thus, tells you the total earnings of a company before it has paid taxes and interest.
EBITDA margin, on the other hand, is an indicative feature of the company’s overall health. However, to get the EBITDA margin of a company—you need to know its EBITDA first. Using the EBITDA margin formula and with the help of an EBITDA margin calculator, you can find out the company's profitability and strength. Based on the EBITDA margin of a company, you can decide whether its stocks are worth an investment.
The EBITDA calculator is easy to use. Using the formula, the EBITDA margin calculator will automatically compute it for you. All you need to do is, enter the company’s revenue, expenses, depreciation, and amortization in the formula box of the EBITDA calculator. You will then get the EBITDA and the margin of a company.
Here’s the formula:
EBITDA = Net Income + Interest Expenses + Tax + Depreciation + Amortization.
In the above formula, net income is equal to Revenue – Expenses (R-E) which is the EBIT of the company. EBIT stands for earnings before interest and taxes.
Simply put, EBITDA equals EBIT + Depreciation + Amortization.
Once you have the EBITDA of a company, you can find the EBITDA margin by using the EBITDA margin calculation formula, as under:
EBITDA margin = EBITDA / Total Revenue (R) x 100
Let us understand this calculation with a simple example:
|
Particulars |
Amount (in Rs.) |
|
Revenue |
200000 |
|
Expenses |
100000 |
|
Amortization |
20000 |
|
Depreciation |
10000 |
Using the formula as above, EBITDA of the company = R-E + D + A
= 200000 -100000+20000+10000
= 130000.
Thus, the EBITDA of Company A is 130000. Now let us find out the EBITDA margin of this company i.e. EBITDA margin = EBITDA/Total Revenue x 100
= 200000/130000 x 100
= 65%
Thus, the EBITDA margin of company A is 65%.
The EBITDA calculation helps you to draw a distinction between two companies from the same sector. It helps to analyze which one company is making better profits at an operational level. It gives you an insight into the cash flows of the company. So if you are looking at companies from the same sector, you must compare them with their EBITDA margins to understand which company is performance-wise better. Remember to always select a company with a higher EBITDA margin than its peers from the same industry sector. The EBITDA and its margin will help you determine which company is more suited to your risks and has the potential of giving you higher profits.........
The EBITDA calculation is a financial metric used to determine a company’s profitability. Since it does not take into account the outside factors such as (taxes, interest on taxes, and depreciation), it depicts the net income of the company in accounting standards. It indicates the shape and health of a company at an operational level. A higher EBITDA denotes that the company has fewer operating expenses and higher earnings, indicating that the company is lucrative for investment......
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EBITDA is essentially net income (or earnings) with interest, taxes, depreciation, and amortization added back. EBITDA can be used to analyze and compare profitability among companies and industries, as it eliminates the effects of financing and capital expenditures.
EBITDA looks at the total earnings of the company before it has paid interest or taxes. It solely focuses on the net cash flow and does not consider non-operational expenses such as taxes, interest on taxes, depreciation, and amortization. Net income, on the other hand, is in contrast to EBITDA. It looks at a company’s operational as well as non-operational expenses such as interests and taxes. However, both play a crucial role in ascertaining the company’s profitability.
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