EBITDA Margin
Earnings before interest, tax, depreciation, and amortisation as a percentage of revenue
What is EBITDA Margin?
EBITDA margin is earnings before interest, tax, depreciation and amortisation as a percentage of revenue. It shows how much operating profit a business makes on each unit of sales, before financing and accounting charges.
Because it strips out capital structure and non-cash charges, it is often used to compare the operating performance of different businesses.
How this KPI is measured
- Function
- Finance
- Sub-function
- Financial Reporting
- Industry
- All Industries
- Type
- Lagging
- Impact
- Financial control
- Unit
- %
- Measurement frequency
- Monthly / Quarterly
- Formula
- (EBITDA / Revenue) × 100
How to calculate it
Divide EBITDA by revenue, and multiply by 100.
For example, if EBITDA is 18,000,000 and revenue is 100,000,000, the margin is 18%.
Remember that EBITDA ignores the cost of assets wearing out, so it can flatter capital-heavy businesses. Use it alongside operating profit and cash flow.
Where it is used
Comparing operating performance
See profitability before financing.
Tracking efficiency
Follow margin over time.
Valuation and lending
Used in multiples and covenants.
How to improve it
Tips and common mistakes
- EBITDA is not cash flow. Capital spending and tax still have to be paid.
- Be careful with adjusted versions and one-offs.
- Compare only within similar industries.
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