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EBITDA Calculator

The metric investors use to compare operating performance across companies with different debt loads and tax situations.

Net income

Interest

Taxes

Depreciation

Amortization

EBITDA

$770,000

What you entered

Net income: $500,000Interest: $50,000Taxes: $120,000Depreciation: $80,000Amortization: $20,000

1
Add back interest, taxes, depreciation, and amortization to net income
$500,000.00 + $50,000.00 + $120,000.00 + $80,000.00 + $20,000.00= $770,000.00

Result

EBITDA: $770,000

EBITDA of $770,000 strips out financing (interest), tax jurisdiction, and accounting (depreciation/amortization) choices — making it a cleaner way to compare operating performance across companies.

EBITDA from net income at different company scales

EBITDA adds back interest, taxes, depreciation and amortisation to net income. Each row runs one set of figures through that addition.

Net income	Interest	Taxes	Depreciation	Amortisation	EBITDA
$50,000	$15,000	$10,000	$25,000	$5,000	$105,000
$100,000	$20,000	$30,000	$40,000	$10,000	$200,000
$250,000	$50,000	$75,000	$80,000	$20,000	$475,000
$500,000	$100,000	$150,000	$150,000	$50,000	$950,000
$1,000,000	$200,000	$300,000	$250,000	$100,000	$1,850,000

EBITDA is roughly double net income in every row here, which is typical for a capital-intensive business and is exactly why the measure is both useful and contested. Stripping out interest and tax makes two companies comparable regardless of how they are financed or where they are domiciled, which is what makes it the usual basis for valuation multiples. Stripping out depreciation and amortisation is the disputed part: those are non-cash charges, but they stand in for assets that genuinely wear out and will need replacing, so EBITDA is not free cash flow and a business with heavy capital expenditure looks healthier through it than it is.

Why add these back?

Interest depends on how a company is financed, taxes depend on jurisdiction, and depreciation/amortization are accounting estimates, not cash outflows — stripping them out isolates how the core business is actually performing.

EBITDA's limits

EBITDA is not the same as cash flow — it ignores real cash needs like capital expenditures and working capital changes. It's a comparison tool, not a substitute for full cash-flow analysis.

EBITDA multiples in business valuation

Companies are often valued as a multiple of EBITDA. Small businesses sell for 3-5× EBITDA, mid-market companies for 6-10×, and high-growth tech companies for 15-30×+. If a business has $2 million EBITDA and trades at 8× multiple, it's valued at $16 million. The multiple depends on industry, growth rate, and risk.

Frequently asked questions

How do you calculate EBITDA?

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization. Start with net income from the income statement, then add back each item. Example: net income $500K + interest $100K + taxes $150K + depreciation $200K + amortization $50K = EBITDA $1,000K.

What is a good EBITDA margin?

It varies wildly by industry. Software/SaaS: 25-40% is strong. Manufacturing: 10-15%. Retail: 5-10%. Restaurants: 15-20%. Compare within the same industry only — a 10% margin is excellent for a grocery chain but poor for a software company.

Why do investors prefer EBITDA over net income?

Net income is affected by how a company is financed (interest), where it's located (taxes), and its accounting choices (depreciation methods). EBITDA strips all of that out, making it easier to compare the core operating performance of two companies in the same industry, regardless of their capital structure.