1. What is EBITDA Margin?

EBITDA Margin is a profitability ratio that measures how much EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) a company generates as a percentage of its revenue. It shows the company's operating profitability before non-operating expenses.

2. How Does the Calculator Work?

The calculator uses the EBITDA Margin formula:

Where:

• \( \text{EBITDA} \) — Earnings Before Interest, Taxes, Depreciation, and Amortization (currency)
• \( \text{Revenue} \) — Total revenue or sales (currency)

Explanation: The formula calculates what percentage of revenue remains as operating profit after accounting for operating expenses but before interest, taxes, depreciation, and amortization.

3. Importance of EBITDA Margin

Details: EBITDA Margin is important because it allows comparison of profitability between companies and industries by eliminating the effects of financing and accounting decisions. A higher margin indicates better operational efficiency.

4. Using the Calculator

Tips: Enter both EBITDA and Revenue in the same currency (e.g., dollars). Revenue must be greater than zero for a valid calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is a good EBITDA margin?
A: This varies by industry, but generally: 10%+ is good, 20%+ is excellent, and below 5% may indicate problems.

Q2: How does EBITDA margin differ from net profit margin?
A: EBITDA margin excludes interest, taxes, depreciation and amortization, while net profit margin includes all expenses.

Q3: Can EBITDA margin be negative?
A: Yes, if EBITDA is negative (operating expenses exceed gross profit), the margin will be negative.

Q4: Why do investors look at EBITDA margin?
A: It helps assess core profitability without the noise of capital structure, tax environments, or non-cash expenses.

Q5: What are limitations of EBITDA margin?
A: It ignores capital expenditures and working capital needs, and can be manipulated through aggressive accounting.