EBITDA Calculator
Earnings before interest, tax, depreciation and amortisation — with the margin, and a warning about what it hides.
EBITDA strips out four things from net profit: interest, which reflects how the business is financed; tax, which reflects where it is domiciled; and depreciation and amortisation, which are non-cash charges reflecting past investment.
How the ebitda calculator works
EBITDA strips out four things from net profit: interest, which reflects how the business is financed; tax, which reflects where it is domiciled; and depreciation and amortisation, which are non-cash charges reflecting past investment. What is left is meant to approximate operating cash generation, which makes companies with different capital structures comparable.
It is worth being blunt about the criticism. Depreciation is not a fiction — it stands for real assets wearing out that will need replacing. For a capital-intensive business, EBITDA can look healthy while the company is quietly consuming itself. Charlie Munger called it "bullshit earnings" for exactly this reason.
EBITDA is also not defined by any accounting standard, so two companies can compute it differently and both be right. Always check what has been added back.
Formula: EBITDA = net profit + interest + tax + depreciation + amortisation
Worked examples
| Inputs | EBITDA | Note |
|---|---|---|
| 5m revenue, 400k net profit | £1,050,000.00 | EBITDA 1.05m, 21% margin |
| A capital-light business | £540,000.00 | EBITDA close to net profit |
| A loss-making company | £330,000.00 | EBITDA still positive |
FAQFrequently asked questions
What is EBITDA?
Earnings before interest, tax, depreciation and amortisation — net profit with those four added back.
Why do companies report EBITDA?
It removes the effects of financing, tax domicile and past investment, which makes operating performance comparable across companies.
What is wrong with EBITDA?
Depreciation stands for real assets wearing out. For capital-intensive businesses, EBITDA can look healthy while the company consumes itself.
Is EBITDA the same as cash flow?
No. It ignores working capital movements, capital expenditure, interest and tax actually paid. Free cash flow is the cash measure.
Is EBITDA defined by accounting standards?
No — it is a non-GAAP, non-IFRS measure. Two companies can calculate it differently, which is why regulators require a reconciliation to statutory profit.
Where these figures come from
- Corporate Finance Institute — EBITDA — why EBITDA is a non-GAAP measure with no single definition
- US SEC — Non-GAAP Financial Measures, Compliance & Disclosure Interpretations — the disclosure rules that exist precisely because EBITDA is not standardised
- Financial Reporting Council — the UK accounting and audit regulator
Last checked: September 2026. These are standard management-accounting definitions; where a term has no single agreed definition, the page says so.