Revenue and costs Updated November 2026

EBITDA

EBITDA = earnings before interest, taxes, depreciation and amortization. Compute it bottom up as net income + interest + taxes + D&A, or top down as revenue - COGS - operating expenses (excluding D&A). It approximates operating cash profit before capital structure, tax and asset age.

Syntax

EBITDA = EBIT + D&A = Net income + interest + taxes + D&A

Examples

Revenue 1,000, COGS 600, SG&A 200, D&A 50
EBIT = 1000 - 600 - 200 - 50 = 150
EBITDA = 150 + 50

Result: 200

Bottom up: net income 90, taxes 30, interest 30, D&A 50
=90 + 30 + 30 + 50

Result: 200

Same company: EBIT 150 - interest 30 = EBT 120, tax 25% = 30, net income 90.

Top down with D&A hidden in COGS and SG&A
=Revenue - COGS - SG&A + D&A

Result: add back whatever D&A those lines contain

Common mistakes

Adding back D&A that is already excluded: if opex is shown before D&A, EBITDA is just revenue minus those costs; adding D&A again overstates it.
Treating EBITDA as cash flow: it ignores capex, working capital and taxes, so a capital-intensive business can have high EBITDA and no free cash flow.
Including non-operating items like gains on asset sales in EBITDA; strip one-offs to get adjusted EBITDA.

Practice EBITDA

These drills check your answer on live data, free, no account needed.

EBITDA and EBITDA marginRevenue, cost of goods sold and operating expenses are set up. Fill EBITDA in row 9 (revenue less both cost lines) and EBITDA margin in row 10.
From EBITDA to net incomeComplete the bottom of the income statement: EBIT (row 7), earnings before tax (row 9), tax at the rate in B2 with no tax in a loss year (row 10) and net income (row 11).

Questions

Why do analysts use EBITDA?

It removes the effects of financing, tax jurisdiction and depreciation policy, so operating performance is comparable across companies and usable in EV/EBITDA multiples.

Is EBITDA the same as operating cash flow?

No. Cash flow from operations starts from net income, adds back D&A and other non-cash items, and subtracts working capital changes and includes taxes and interest paid.

EBITDA marginEBITDA margin = EBITDA / revenue, the share of each sales dollar left as operating profit before D&A. Formula, exact examples, what is a good margin, errors.
EBITDA to net incomeNet income = EBITDA - D&A - interest - taxes. Each step of the bridge (EBIT, EBT, tax at the rate, net income) with exact numbers and the tax-on-losses rule.
Gross marginGross margin = (revenue - COGS) / revenue. The formula, worked examples with exact percentages, the difference between margin and markup and common mistakes.
Exit multipleThe exit multiple method sets terminal value as final year EBITDA times a market multiple. Worked example, present value at WACC and the implied growth check.