This EBITDA calculator builds earnings before interest, taxes, depreciation and amortization from net income — adding back each excluded item — and reports the EBITDA margin. It also accepts the operating-income route, because the two build paths should reconcile, and checking that they do is the mark of someone who actually understands the metric.

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What Each Add-Back Is Trying to Erase

EBITDA exists to answer a narrow question: what did the operations earn, stripped of how they're financed (interest), where they're taxed (taxes), and how their past capex was expensed (depreciation) or their acquisitions amortized? Each add-back removes a real economic fact to buy comparability — two otherwise identical businesses, one debt-financed and one equity-financed, print the same EBITDA. The defaults build $300k + $50k + $80k + $120k = $550,000, and at $2.75M revenue a 20.0% margin. The reconciliation this calculator shows — EBIT ($430k) + D&A = the same $550k — isn't pedantry; the day your two routes disagree is the day an input is wrong.

The critique is equally standardized and equally true: depreciation is a REAL cost (assets wear out; Charlie Munger's “bullshit earnings” jab targeted exactly the pretense otherwise), interest and taxes are real cash, and EBITDA ignores capex and working capital entirely — which is why it must never be called “cash flow.” Its legitimate kingdoms are valuation (EV/EBITDA, our Enterprise Value page's multiple), credit agreements (where it's contractually defined to the comma), and cross-company operating comparison. “Adjusted EBITDA” — management's version with stock comp, restructuring and “one-offs” also added back — is where diligence sharpens: recurring “one-time” charges that appear every year are operating costs in a trench coat.

Worked Examples (Verified)

  • Defaults: 300k + 50k + 80k + 120k = $550,000; margin 550k ÷ 2.75M = 20.0%. Multiple check: at EV $4.4M this business trades at 8.0× EBITDA.
  • The capital-intensive distortion: a manufacturer's NI is only $80k but D&A is $400k → EBITDA $610k (with I $60k, T $70k). EBITDA screams strength while net income whispers the truth that its machines are consuming themselves — read both, always.
  • The asset-light contrast: a software firm with D&A of $10k has EBITDA ≈ EBIT ≈ operating reality; the add-backs barely matter when nothing depreciates — the metric's usefulness scales with capital intensity.

EBITDA Discipline

  • Reconcile both build routes (from net income, and EBIT + D&A) before using the number — disagreement means a data error, not a methodology choice.
  • Ask what “adjusted” removed: stock-based compensation is a real cost to shareholders even when it's non-cash to the company; perpetual “one-offs” are neither.
  • Never label EBITDA as cash flow — capex and working-capital changes stand between it and operating cash flow, sometimes enormously.
  • Margins compare within industries only: 20% is premium for a manufacturer and weak for a software firm; the multiple (EV/EBITDA) embeds the same relativity.
  • Lender-defined EBITDA (in credit agreements) is a legal term with negotiated add-backs — covenant calculations use THEIR definition, not the textbook's.

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Frequently Asked Questions

How do you calculate EBITDA?

Net income + interest + taxes + depreciation & amortization. Defaults: $300,000 + $50,000 + $80,000 + $120,000 = $550,000. Equivalently, operating income (EBIT) + D&A — this calculator shows both routes reconciling, and the margin (EBITDA ÷ revenue) alongside: 20.0% on $2.75M revenue here.

Why add back depreciation if assets really wear out?

The honest answer is comparability, not truth: depreciation schedules vary by accounting policy and asset age, so removing D&A lets analysts compare operating performance across firms and periods before those choices. The cost of the convenience is exactly your point — EBITDA overstates economic earnings for capital-intensive businesses whose assets genuinely consume themselves. Use it to compare operations; never as a measure of what's left for owners (that's nearer free cash flow).

EBITDA vs operating income (EBIT)?

EBIT stops one floor higher: it keeps depreciation and amortization deducted. EBIT = revenue − COGS − operating expenses including D&A; EBITDA adds D&A back. For our defaults EBIT is $430k, EBITDA $550k — the $120k gap is the entire argument between the two metrics, and it's why capital intensity decides which one a careful analyst leads with.

What is a good EBITDA margin?

Sector-bound: software and exchanges 30–50%+, telecoms ~30–40%, general manufacturing 12–20%, retail 5–10%, airlines and grocers 3–8%. “Good” means at-or-above your industry's median and stable-to-expanding — a falling margin at a growing company is operating deleverage announcing itself. The margin also disciplines valuation: high-multiple EV/EBITDA on a thin, falling margin is two risks wearing one ticker.

What is “adjusted EBITDA” and should I trust it?

Management's EBITDA plus further add-backs: stock compensation, restructuring, litigation, “strategic” costs, sometimes lost contracts' revenue. Some adjustments are legitimate comparability work; the genre is also famous for abuse (a certain coworking company's “community-adjusted EBITDA” excluded most of its costs). Audit rule: any adjustment that recurs annually is an operating cost, whatever it's labeled, and the unadjusted figure from this calculator is your anchor.

Is EBITDA the same as cash flow?

No — and the difference funds a lot of bad decisions. EBITDA ignores capital expenditures (often the largest real outflow for growing firms), working-capital swings (receivables/inventory build can consume a year's EBITDA), and cash taxes and interest by construction. Operating cash flow and free cash flow (our FCF Calculator) are the cash metrics; EBITDA is an earnings proxy for valuation and covenant math. Confusing the two is how “profitable” companies run out of money.

How is EBITDA used in valuation?

As the denominator of EV/EBITDA — the acquisition multiple: at our $550k EBITDA and an 8× sector multiple, enterprise value ≈ $4.4M. The multiple absorbs growth, margin quality, capital intensity and risk into one number, which makes it fast and dangerous in equal measure: compare multiples only within sectors, and remember the buyer still has to fund the capex and taxes EBITDA pretended away.

Is this EBITDA calculator free?

Yes — free, instant, no sign-up. Enter net income, interest, taxes and D&A (plus revenue for margin) and get EBITDA with both build routes shown.