EBITDA describes the operating result before interest, (income) taxes and amortisation of property, plant and equipment, and intangible assets.
What’s it all about?
- What does EBITDA mean?
- How is EBITDA calculated?
- What is the EBITDA margin?
- What is the difference between EBITDA and EBIT?
What does EBITDA mean?
EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) describes the operating result before the deduction of interest, taxes and depreciation and amortisation of property, plant and equipment, and intangible assets. It is a key figure used in business management to enable international comparisons despite different legal or fiscal systems.
How is EBITDA calculated?
EBITDA is made up of EBIT plus depreciation and amortisation of property, plant and equipment, and intangible assets. EBITDA can be calculated using both the total cost method and the cost of sales method. There is also adjusted EBITDA. For this purpose, extraordinary expenses are added to EBITDA and extraordinary income is deducted.
What is the EBITDA margin?
The EBITDA margin measures the profit generated as a percentage of company sales. It shows whether a company can cover all costs incurred in its operating activities, making it profitable.
The EBITDA margin is calculated by dividing EBITDA by sales and multiplying the result by 100. The EBITDA margin is always stated as a percentage.
What is the difference between EBIT and EBITDA?
In addition to EBITDA, there is also EBIT (Earnings Before Interest and Taxes). Unlike EBITDA, EBIT only calculates earnings before interest and taxes. Similar to the EBITDA margin, an EBIT margin can be calculated, providing information about the relationship between sales and EBIT.