This EBITDA Margin Calculator determines the relationship between Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), Revenue, Operating Expenses, and the resulting EBITDA Margin.
Welcome to the **EBITDA Margin Calculator**. EBITDA margin is a crucial profitability metric that measures a company’s operating performance before the impact of capital structure (interest, debt) and accounting choices (depreciation/amortization). It helps investors compare the core profitability across different companies. This versatile tool allows you to solve for the missing variable from four key metrics: EBITDA ($E$), Revenue ($R$), Operating Expenses ($OE$), and the EBITDA Margin ($M$).
EBITDA Margin Calculator
EBITDA Margin Formulas
The core relationships are $E = R – OE$ and $M = \frac{E}{R} \times 100$.
1. Solve for Margin (M):
$$ M = \frac{R – OE}{R} \times 100 $$
2. Solve for EBITDA (E):
$$ E = R \times \frac{M}{100} $$
3. Solve for Revenue (R):
$$ R = \frac{OE}{\left(1 – \frac{M}{100}\right)} $$
4. Solve for Operating Expenses (OE):
$$ OE = R – E $$
Formula Source: Investopedia – EBITDA Margin
Variables Explained
- EBITDA (E): Earnings Before Interest, Taxes, Depreciation, and Amortization. (Currency)
- Revenue (R): Total sales made by the company. (Currency)
- Operating Expenses (OE): All operational costs including COGS, SG&A, etc. (Currency)
- EBITDA Margin (M): EBITDA as a percentage of Revenue. (Percentage)
Related Calculators
What is EBITDA Margin?
EBITDA Margin is a critical measure of core corporate profitability. It is calculated by dividing the company’s EBITDA by its total Revenue. Because it excludes interest, taxes, and non-cash expenses like D&A, it provides a clean view of the operational efficiency and is often used by analysts to compare companies across different jurisdictions (due to varying tax laws) and industries (due to varying capital expenditures and financing costs).
A high EBITDA margin suggests strong profitability and efficient management of operational costs relative to sales. However, it should not be confused with free cash flow, as it ignores crucial spending like capital expenditures.
The primary purpose of the EBITDA margin is to assess the true operating health of a business, particularly for potential acquisitions or highly leveraged companies.
How to Calculate Revenue (Example)
A company reports an **EBITDA Margin** ($M$) of **25%**, and **Operating Expenses** ($OE$) of **$600,000**. Its **EBITDA** ($E$) is **$200,000**. What is the missing **Revenue** ($R$)?
- Determine the Missing Variable: Revenue ($R$) is missing.
- Apply Formula (using $E$ and $M$): Since $E = R \times M_{dec}$, we have $R = E / M_{dec}$.
- Convert Margin: $M_{dec} = 25 / 100 = 0.25$.
- Substitute Values: $R = \$200,000 / 0.25$.
- Calculate: $R = \$800,000$.
- Consistency Check: $R = E + OE$? $\$800,000 = \$200,000 + \$600,000$. The result is consistent.
- Result: The Revenue is **$800,000.00**.
Frequently Asked Questions (FAQ)
EBITDA excludes Depreciation and Amortization (D&A), while Operating Income (EBIT) includes D&A. EBIT is often viewed as a better measure for companies with high capital expenditures, while EBITDA is preferred for comparing companies with different fixed asset bases.
Can the EBITDA Margin be negative?Yes. If the company’s EBITDA is negative (meaning $Revenue < Operating Expenses$), the margin will be negative. This indicates that the core business operations are unprofitable.
Is a high EBITDA Margin always a good sign?Not always. A high margin suggests strong operations, but if the company requires massive investments in fixed assets (high Depreciation) or has high interest payments, its net income (bottom line profit) might still be low or negative.
What happens if Revenue (R) is zero when calculating Margin (M)?If Revenue ($R$) is zero, the division $M = E/R$ is undefined. The calculator prevents this specific error, as a company cannot usually have a calculated margin without generating sales.