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:

• EBITDA — Earnings Before Interest, Taxes, Depreciation, and Amortization (in currency)
• Revenue — Total revenue or sales (in currency)

Explanation: The formula calculates what percentage of revenue remains after accounting for operating expenses (excluding 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. The result shows what percentage of revenue is EBITDA.

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: Why exclude depreciation and amortization?
A: These are non-cash expenses that vary based on accounting methods, so excluding them allows better comparison of operating performance.

Q4: Can EBITDA margin be negative?
A: Yes, if operating expenses exceed revenue, resulting in negative EBITDA.

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