EBITDA and Profit Margin Calculator

From revenue down to net profit in one pass: gross profit, EBITDA, operating profit (EBIT), profit before tax and net profit, each with its margin on revenue.

From revenue to net profit

Same EBITDA, different businesses underneath

What EBITDA shows, what it hides, and why it is “non-GAAP”

An income statement peels costs off revenue in layers, and each layer answers a different question. Gross profit is what is left after the direct cost of what was sold. EBITDA then takes off the costs of running the business — salaries, rent, marketing — but not depreciation, amortisation, interest or tax. EBIT, or operating profit, takes off depreciation and amortisation too. Profit before tax takes off interest, and net profit takes off tax. In the example, revenue of $1,20,00,000 becomes an EBITDA of $22,00,000 (18.33%) and a net profit of $9,00,000 (7.50%).

EBITDA is popular because it compares the operating performance of businesses with different loans, tax positions and ages of equipment. That is also its weakness. Machines wear out and have to be replaced, and interest has to be paid; a measure that leaves both out can make a business with heavy assets and heavy debt look as healthy as one with neither, as the table shows. It is not cash flow either: it ignores money tied up in stock and unpaid invoices, and the cash spent on new equipment. For how depreciation is worked out, see the depreciation calculator.

EBITDA is a “non-GAAP” measure: generally accepted accounting principles do not define it. In India, the ICAI’s guidance on the Ind AS format of the profit and loss statement lets a company choose to show EBITDA as an extra line, but does not require it or fix one definition, so companies differ on items such as other income or one-off costs. IFRS 18, which takes effect for periods beginning on or after 1 January 2027, adds a required operating profit subtotal and makes companies that quote their own “management-defined” performance measures, such as an adjusted EBITDA, explain and reconcile them in the notes; India’s version, Ind AS 118, was still a proposal at the time of writing. In the United States the SEC requires any non-GAAP figure to be reconciled to its nearest GAAP measure. Whenever you compare a published EBITDA, read how that company defines it.

This page follows the plain layered definition, leaves other income out and takes tax as the amount you enter; it does not apply any country’s tax rates. The profit margin calculator works on one product’s price and cost, and the contribution margin calculator splits costs by how they behave instead. This is arithmetic on the figures you enter, not financial advice.

Frequently asked questions

Related calculators

References

1. Institute of Chartered Accountants of India. Guidance Note on Division II – Ind AS Schedule III to the Companies Act, 2013 (July 2017): EBITDA “is often an important measure of financial performance … A company may choose to present the same as an additional line item on the face of statement of profit and loss” — optional, and not a subtotal Ind AS defines. As summarised by PwC India, ReportingInBrief, 2017.
2. International Accounting Standards Board. IFRS 18 Presentation and Disclosure in Financial Statements, issued April 2024, effective for annual periods beginning on or after 1 January 2027: a required operating profit subtotal, and management-defined performance measures (such as many “adjusted EBITDA” figures) disclosed in the notes with a reconciliation to the nearest IFRS subtotal. India’s equivalent, Ind AS 118, was issued by ICAI as an exposure draft on 6 January 2025, proposed for periods from 1 April 2027.
3. U.S. Securities and Exchange Commission. Regulation G (17 CFR 244) and Item 10(e) of Regulation S-K: a non-GAAP financial measure, such as EBITDA, must be presented with the most directly comparable GAAP measure and a reconciliation to it. Cited for the meaning of “non-GAAP”; it binds U.S.-registered issuers only.
4. Dahlquist J, Knight R. Principles of Finance. OpenStax, Rice University, 2022. Section 6.2 (operating efficiency: inventory turnover = cost of goods sold ÷ average inventory; receivables turnover = credit sales ÷ average receivables), section 6.4 (solvency: debt-to-assets = total liabilities ÷ total assets; debt-to-equity = total liabilities ÷ total stockholders’ equity; times interest earned = EBIT ÷ interest expense) and section 6.6 (return on assets and on equity on average balances; the DuPont method: profit margin × total asset turnover × equity multiplier).