What does EBITDA stand for?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. It is a proxy for operating cash flow that strips out financing decisions (interest), tax jurisdictions (taxes), and non-cash accounting charges (D&A), making it easier to compare companies across capital structures and geographies.

How is EBITDA calculated?

There are two equivalent routes. Bottom-up: EBITDA = Net Income + Interest + Taxes + Depreciation + Amortisation. Top-down: EBITDA = Revenue - COGS - OpEx (i.e. EBIT) + Depreciation + Amortisation. This calculator uses the top-down method so every line of the income statement is visible.

What is a good EBITDA margin?

It depends on the industry. Software-as-a-Service companies often reach 20-40% margins at scale. Retail and distribution businesses typically operate at 3-8%. Healthcare and industrials sit in the 10-20% range. A margin that is positive and improving year-on-year is the primary signal — the absolute level only makes sense against sector peers.

What does EV/EBITDA tell you?

Enterprise Value divided by EBITDA is the most common acquisition and valuation multiple. It tells you how many years of current EBITDA it would take to pay the entire enterprise value. A lower multiple suggests relative cheapness; a higher multiple implies growth expectations or scarcity premium. Typical ranges are 6-10x for mature businesses and 15-25x+ for high-growth technology companies.

What is a safe Debt/EBITDA ratio?

Below 2x is generally considered comfortable for investment-grade companies. Leveraged buyouts often push this to 4-6x, relying on expected cash flow improvement to delever. Above 5x starts to concern lenders because a modest EBITDA decline can make debt-service difficult. The calculator flags the ratio so you can benchmark it against your sector.

Why does EBITDA exclude depreciation and amortisation?

Depreciation and amortisation are non-cash charges — they reduce accounting profit but no cash actually leaves the business in the period. Excluding them gives a cleaner view of the cash-generative power of operations before capital-allocation decisions. However, businesses with heavy capital expenditure requirements should also look at EBITDA minus capex ("free cash flow proxy") rather than raw EBITDA alone.

EBITDA Calculator — Gera Tools

EBITDA — Earnings Before Interest, Taxes, Depreciation, and Amortisation — is the single most widely cited measure of a business’s operating performance. Analysts, private equity firms, lenders, and founders use it to size valuations, stress-test debt capacity, and compare businesses across different tax jurisdictions and capital structures. This calculator builds the full income-statement waterfall from revenue down to net income, then surfaces every ratio you need: EBITDA, EBITDA margin, EBIT, EV/EBITDA multiple, Debt/EBITDA leverage, and interest coverage. Everything runs in your browser — no data is uploaded or stored.

How it works

The calculator follows the standard top-down income statement:

Gross Profit = Revenue - Cost of Goods Sold (COGS)

EBIT (Operating Income) = Gross Profit - Operating Expenses - Depreciation - Amortisation

EBITDA = EBIT + Depreciation + Amortisation

Because depreciation and amortisation are added back to EBIT, EBITDA is always larger than or equal to EBIT. The difference is exactly the D&A charge — a useful cross-check.

From EBITDA the calculator derives four key ratios:

EBITDA Margin = EBITDA / Revenue — shows what percentage of each revenue pound or dollar survives as operating earnings.
EV/EBITDA = Enterprise Value / EBITDA — the standard M&A and DCF sanity-check multiple.
Debt/EBITDA = Total Debt / EBITDA — the primary leverage metric used by credit analysts.
Interest Coverage = EBITDA / Interest Expense — measures how comfortably the business services its debt; lenders typically require this above 2-3x.

Net income is back-calculated as: Net Income = EBIT - Interest Expense - Income Taxes.

Worked example

Suppose a mid-market software company reports:

Line item	Amount
Revenue	$5,000,000
COGS	$2,000,000
Operating Expenses	$1,200,000
Depreciation	$150,000
Amortisation	$50,000
Interest Expense	$80,000
Income Taxes	$180,000
Enterprise Value	$12,000,000
Total Debt	$800,000

Step 1 — Gross Profit: 5,000,000 - 2,000,000 = $3,000,000

Step 2 — EBIT: 3,000,000 - 1,200,000 - 150,000 - 50,000 = $1,600,000

Step 3 — EBITDA: 1,600,000 + 150,000 + 50,000 = $1,800,000

Step 4 — EBITDA Margin: (1,800,000 / 5,000,000) x 100 = 36%

Step 5 — EV/EBITDA: 12,000,000 / 1,800,000 = 6.67x

Step 6 — Debt/EBITDA: 800,000 / 1,800,000 = 0.44x (very low leverage)

Step 7 — Interest Coverage: 1,800,000 / 80,000 = 22.5x (very healthy)

Step 8 — Net Income: 1,600,000 - 80,000 - 180,000 = $1,340,000

These defaults are pre-loaded in the calculator — hit the fields to explore how margin, leverage, and the valuation multiple shift as the numbers change.