EBITDA Calculator

Add back interest, tax, depreciation and amortization to net income.

Net income

Interest

Taxes

Depreciation

Amortization

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EBITDA

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How it works

An EBITDA calculator rebuilds a company's earnings before four costs that can obscure how the core business actually performs: interest, taxes, depreciation and amortization. Starting from net income — the bottom-line profit — you add each of these back to arrive at EBITDA, a proxy for the cash-generating power of operations before financing structure and accounting choices distort the picture. Interest depends on how much debt a company carries, tax depends on jurisdiction and one-off items, and depreciation and amortization are non-cash charges that spread the cost of past investments across many years. By removing all four, EBITDA lets an analyst compare two companies that made very different financing and investment decisions on a more level footing, which is why it dominates valuation multiples, loan covenants and acquisition negotiations. Private-equity buyers, lenders and CFOs lean on EBITDA to size deals and set debt limits because it approximates the earnings available to service borrowings. The add-back method used here reverses the income statement: each excluded cost that was subtracted to reach net income is restored. EBITDA is not a substitute for cash flow — it ignores real capital spending and working-capital swings — but as a quick, comparable gauge of operating performance it remains one of the most widely quoted figures in finance, and this calculator produces it in a single step from five familiar numbers.

Formula

EBITDA = net income + interest + taxes + depreciation + amortization

Net income already has interest, taxes, depreciation and amortization subtracted, so EBITDA simply adds them back. Interest and taxes are removed because they reflect financing and jurisdiction rather than operating skill; depreciation and amortization are non-cash accounting charges that allocate past spending over time. Restoring all four to net income leaves earnings before those items — a cleaner, more comparable measure of what the underlying operation generates each period.

Source:Standard financial (EBITDA) definition

We review all our tools from time to time to ensure accuracy.

Worked example

Net income:500000Interest:120000Taxes:80000Depreciation:60000Amortization:40000

EBITDA = 500,000 + 120,000 + 80,000 + 60,000 + 40,000 = $800,000.

How to use this calculator

1
Enter your values
Enter net income, interest, taxes, depreciation and amortization.
2
Adjust the options
Fine-tune any options to match your situation.
3
Read your result
EBITDA updates instantly as you type — no button to press.

Frequently asked questions

What does EBITDA actually measure?

EBITDA approximates the earnings a business generates from its core operations before the effects of how it is financed, how it is taxed, and how it accounts for past investments. By adding interest, taxes, depreciation and amortization back to net income, it strips out items that vary between companies for reasons unrelated to operating performance. The result is a figure many analysts treat as a rough proxy for operating cash earnings and use to compare firms on similar terms.

Why add depreciation and amortization back?

Depreciation and amortization are non-cash charges. They spread the cost of assets a company already paid for — machinery, buildings, acquired intangibles — across the years those assets are used. No cash leaves the business when the charge is recorded. Adding them back to net income removes an accounting allocation that would otherwise understate the cash the operation currently produces, giving a clearer view of ongoing earning power in the period being measured.

Is EBITDA the same as cash flow?

No, and treating it as such is a common and dangerous mistake. EBITDA ignores real cash needs that a genuine cash-flow measure captures: capital expenditure to replace worn-out equipment, changes in working capital as receivables and inventory grow, and actual interest and tax payments. A company can show healthy EBITDA yet burn cash if it must constantly reinvest heavily. Use EBITDA for comparison, but check free cash flow to judge true liquidity.

Why is EBITDA used in valuation?

Buyers and investors often value a company as a multiple of EBITDA because it approximates operating earnings available before financing and tax choices that the new owner may change. It also smooths out differences in depreciation policy and capital structure, making two acquisition targets easier to compare. Enterprise-value-to-EBITDA is among the most common valuation multiples in mergers, private equity and lending, which is why the figure is negotiated so closely in deals.

What are the limitations of EBITDA?

EBITDA can flatter a company by hiding the real cost of running and reinvesting in the business. Because it excludes depreciation, it ignores that assets wear out and must be replaced with actual cash. Because it excludes interest, it can make a heavily indebted firm look healthier than it is. Critics argue it is easy to lean on EBITDA to present a rosier story, so it should always be read alongside net income, free cash flow and debt levels.