How this calculator works
The EBITDA margin divides EBITDA by revenue and expresses the result as a percentage. It answers how much operating cash profit each dollar of sales produces before interest, tax, depreciation and amortization. A rising margin can come from pricing power, better purchasing or operating leverage as fixed costs are spread over more sales. A falling margin may signal discounting, cost inflation or a shift toward lower-margin products. Because EBITDA excludes capital spending, a high margin does not guarantee that the business is generating free cash.
Formula
EBITDA margin = EBITDA / total revenue. EBITDA = EBITDA margin × total revenue. Total revenue = EBITDA / EBITDA margin.
Worked example
EBITDA of $400,000 on $2,000,000 of revenue gives a margin of 0.2, or 20 per cent. At the same margin, $2,500,000 of revenue would produce $500,000 of EBITDA.
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Frequently asked questions
What is a good EBITDA margin?
It varies widely by industry. Software and services can exceed 30 per cent, while grocery retail often runs in low single digits. Compare within the industry and look at the trend rather than a single year.
How does EBITDA margin differ from gross margin?
Gross margin deducts only cost of goods sold. EBITDA margin also deducts operating expenses such as selling, general and administrative costs, but adds back depreciation and amortization. It is the broader measure of operating profitability.
Can the margin be negative?
Yes. If operating profit is negative and the non-cash add-backs do not cover it, EBITDA is negative and so is the margin. The calculator accepts a negative margin and negative EBITDA.