Free EBITDA Calculator

This calculator helps you compute Earnings Before Interest, Taxes, Depreciation, and Amortization—commonly known as EBITDA—a widely used metric for evaluating a company’s operational performance. By stripping out financing and accounting decisions, EBITDA offers a clearer view of how efficiently a business generates profit from its core activities.

EBITDA Definition

EBITDA is closely related to EBIT but goes one step further by also adding back depreciation and amortization expenses. In essence, it measures operating profit before the effects of capital structure, tax regimes, and non-cash accounting charges. This makes the indicator particularly useful for comparing companies that operate under different tax systems or follow different financing strategies, because it focuses solely on the operational side of the business.

While EBIT already excludes interest and taxes, EBITDA further removes depreciation (the gradual allocation of tangible asset costs) and amortization (the systematic write‑down of intangible assets or loan principal). The result is a metric that approximates the cash flow generated from operations before capital expenditures and financing costs.

How to Calculate EBITDA

Calculating EBITDA is straightforward once you have the income statement in hand. The most direct formula is:

$$\text{EBITDA} = \text{Operating Profit} + \text{Depreciation Expense} + \text{Amortization Expense}$$

• Operating Profit (also called EBIT) represents the profit from normal business operations after deducting cost of goods sold and operating expenses but before interest and taxes.
• Depreciation Expense is the annual charge for the wear‑and‑tear of physical assets like machinery, buildings, and equipment.
• Amortization Expense covers the gradual reduction in the value of intangible assets such as patents, trademarks, goodwill, or capitalized software development costs.

You can calculate EBITDA for a single quarter or for the trailing twelve months (TTM). To obtain a TTM figure, simply sum the operating profit and the depreciation/amortization amounts from the last four quarters. Many business analysts also use EBITDA as a starting point for calculating free cash flow metrics like unlevered or levered free cash flow.

EBITDA Multiple and Company Valuation

Beyond the absolute number, investors often refer to the EBITDA multiple (also called the enterprise multiple). This ratio compares a company’s enterprise value (EV) to its EBITDA:

$$\text{EBITDA Multiple} = \dfrac{\text{Enterprise Value}}{\text{EBITDA}}$$

A lower multiple may indicate that the company is undervalued relative to its earnings‑generating ability, while a higher multiple can suggest overvaluation. The EBITDA multiple is frequently used alongside other valuation tools—such as price‑to‑book or EV‑to‑sales ratios—to determine whether a stock’s current price fairly reflects the business’s true worth.

By isolating operational performance from capital structure and accounting choices, EBITDA and its derived multiples help analysts, investors, and business owners assess profitability, compare peers, and make informed decisions about company valuation.