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FreeOPERATIONAL PROFIT

EBITDA Calculator

Calculate Earnings Before Interest, Taxes, Depreciation, and Amortization to measure operating profitability.

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Net profit tells you what is left after everything; EBITDA tells you whether the operations make money before financing choices, tax and accounting for old assets get in the way. Lenders, investors and buyers of small businesses quote it constantly ("we'll pay 4× EBITDA"), and MSME loan appraisals lean on it. This calculator computes EBITDA and EBITDA margin from either a profit-and-loss statement (net profit plus interest, tax, depreciation and amortisation) or from revenue and operating expenses, and shows EBIT alongside.

What EBITDA is

Earnings Before Interest, Taxes, Depreciation and Amortisation. Starting from net profit (PAT): add back income tax, interest on loans, depreciation on tangible assets and amortisation of intangibles. Starting from revenue: subtract cost of goods sold and cash operating expenses (salaries, rent, marketing, utilities), but not depreciation, interest or tax. EBITDA margin = EBITDA ÷ revenue.

Example: revenue ₹1.2 crore, PAT ₹12 lakh, interest ₹4 lakh, tax ₹4.5 lakh, depreciation ₹6 lakh, amortisation ₹0.5 lakh → EBITDA ₹27 lakh, margin 22.5%; EBIT ₹20.5 lakh.

Why it matters for a small business

  • Loan appraisal: banks look at EBITDA ÷ interest (interest coverage) and debt ÷ EBITDA. Coverage below 2× or debt above 3–4× EBITDA makes lenders nervous; run scenarios with the EMI calculator.
  • Valuation: small businesses in India change hands at roughly 3–6× EBITDA depending on sector and growth; a ₹27 lakh EBITDA business might be valued at ₹80 lakh to ₹1.6 crore.
  • Comparing branches or product lines that carry different asset ages and loans — EBITDA strips out those differences.
  • Tracking operations monthly without waiting for the CA's year-end depreciation entries.

How to use the calculator

  1. Choose the starting point: from PAT (add-backs) or from revenue (subtract operating costs).
  2. Enter the figures from your P&L — use the depreciation from the depreciation calculator if you have not yet booked it.
  3. Read EBITDA, EBITDA margin, EBIT and, if you enter interest and debt, the interest coverage and debt-to-EBITDA ratios.
  4. Compare periods to see whether operating profitability is improving independent of loan or tax changes.

The limits of EBITDA

  • It ignores capital expenditure: a transport business with an EBITDA of ₹30 lakh that must replace ₹25 lakh of trucks every few years is not earning ₹30 lakh.
  • It ignores working capital: growing receivables can starve cash while EBITDA looks healthy — watch inventory turnover and collection days.
  • It is not cash; GST, TDS and advance tax are paid from cash. Pair it with net profit margin for the real bottom line.
  • "Adjusted EBITDA" with owner salary added back is fine for valuation but say so explicitly.

For a full picture of profitability metrics — gross, contribution, operating, net — start with the profit margin calculator and the gross margin calculator.

If you are preparing an EBITDA-based loan proposal, the schemes, rates and eligibility are compared in MSME loan schemes in 2026, and the structure question (proprietorship, LLP or company) that affects tax below the EBITDA line is in Proprietorship vs LLP vs Private Limited.

Frequently asked questions

Is EBITDA the same as operating profit?

Close but not identical: operating profit (EBIT) is after depreciation and amortisation; EBITDA adds those back. Both exclude interest and tax.

Should I add back the owner's salary?

For valuation, buyers often compute "seller's discretionary earnings" by adding back owner compensation above market. For lending and internal tracking, keep a market salary as a cost.

What is a good EBITDA margin?

Trading businesses run 5–12%, manufacturing 12–25%, services and software 20–40%. Trend matters more than the level.

Does GST affect EBITDA?

No. GST collected and paid is a pass-through and should be excluded from revenue and costs. Only non-creditable GST that becomes part of an expense affects it.

Which figure do banks use for loan eligibility?

Usually cash accruals (PAT + depreciation) and EBITDA-based coverage ratios, along with turnover and collateral. Showing both EBITDA and PAT in your proposal helps.