EBITDA Calculator

What EBITDA really measures

EBITDA — Earnings Before Interest, Taxes, Depreciation and Amortisation — is one of the most quoted profitability measures in business and investing. Its purpose is simple: strip away the effects of how a company is financed and how it accounts for past investments, so you can see how well the core operations actually perform. On ₹1 crore of revenue with ₹55 lakh of COGS and ₹20 lakh of operating expenses, EBITDA is ₹25 lakh and the margin a healthy 25%.

• EBITDA = Revenue − COGS − Operating expenses (excluding D&A)
• EBITDA margin = EBITDA ÷ Revenue × 100

Why strip out interest, tax and D&A?

Two companies in the same business can look very different on the bottom line simply because one carries more debt or depreciates its assets faster. Interest reflects financing choices, tax reflects jurisdiction and structure, and depreciation and amortisation are non-cash charges tied to past spending. By removing all four, EBITDA lets you compare the underlying earning power of businesses on a like-for-like basis — which is exactly why lenders and private-equity investors lean on it so heavily.

EBITDA in the Indian context

For Indian businesses, EBITDA margins swing widely by sector. Asset-light IT and services firms routinely post margins above 20-25%, while trading and manufacturing businesses that carry heavy input costs often run in single digits to the mid-teens. Lenders here frequently use the Debt/EBITDA ratio to judge how many years of operating profit it would take to clear borrowings, and valuations are often quoted as a multiple of EBITDA (EV/EBITDA).

The limits you must respect

For all its usefulness, EBITDA has real blind spots. It ignores capital expenditure, so a factory that must constantly replace machinery looks better on EBITDA than it deserves. It also excludes the genuine cost of interest and tax, and says nothing about working capital, meaning a business can report strong EBITDA while cash is trapped in receivables and inventory. Treat EBITDA as a starting point: read it alongside net profit, operating cash flow and capex, and be wary of heavily "adjusted" EBITDA figures that quietly exclude recurring costs.