EBITDA Margin Calculator

Many financial metrics are used to measure a company's profitability. One such metric is EBITDA, which is the short form of Earnings Before Interest, Tax, Depreciation, and Amortisation. EBITDA shows a company's operating profit before considering non-operating expenses like interest on debt, tax liability, depreciation, and amortisation costs.

While EBITDA represents the company's profit in absolute figures, EBITDA margin helps you compare companies in the same sector.

What is EBITDA Margin?

EBITDA margin is a financial ratio that measures the operating profit of a company against its revenue. It depicts the profitability of the business in percentage terms and helps compare businesses. Using an EBITDA margin calculator, you can calculate and compare the EBITDA margin of two or more companies from the same sector.

What is EBITDA Margin Calculator?

Calculation of the EBITDA margin requires you to calculate the EBITDA and then use the EBITDA margin percentage formula to calculate the EBITDA margin. An easier way to do this is by using the EBITDA margin calculator.

This online tool calculates the EBITDA margin based on the details that you provide. You can learn how to calculate the EBITDA margins of multiple companies using the online calculator and get instant and accurate results.

How Does EBITDA Margin Calculator Work?

The EBITDA margin calculator works on the EBITDA margin percentage formula. First, the calculator calculates the EBITDA of the company based on the relevant details such as:

• Net sales or revenue
• Labour cost
• Cost of raw materials
• Selling expenses
• Administrative expenses
• Other operating costs

Then, the EBITDA margin calculator works out the EBITDA margin using the EBITDA margin calculation formula.

How to Use EBITDA Margin Calculator?

You can use the EBITDA margin calculator online through Shriram Finance. Just visit the website and choose the EBITDA margin calculator. You will have to enter the following details to get the margin:

• The value of net sales or revenue
• Cost of raw materials
• Cost of labour
• Other operating expenses like sales and distribution costs, administrative expenses, transportation expenses, etc.

Once the details are entered, click on continue and the EBITDA margin calculator will calculate and show the margin percentage.

How to Calculate EBITDA Margin?

You can calculate the EBITDA margin by dividing the EBITDA of a company by its revenue. Revenue means the sales generated by the company in a financial year. This information is readily available in the company's financial statements.

In the case of EBITDA, though, the value might be available in the financial statements or you might have to calculate it manually.

For the EBITDA calculation in India, there are two ways to find the value. Have a look -

• Deduct the operating expenses from the net sales or revenue amount. Operating expenses means the expenses incurred in running the business. These include raw material costs, labour costs, administrative and distribution expenses, rent, etc.
• Alternatively, you can add the deducted depreciation, interest, tax, and amortisation expenses to the net profit to get the EBITDA. The values of depreciation, interest paid, tax paid, and amortisation expenses are available in the profit and loss statement of the company.

Once you have the EBITDA, you can find the EBITDA margin by dividing the figure by the revenue value. Entering the details and EBITDA margin formula in Excel can also help in calculating the EBITDA margin.

EBITDA Margin Formula

To learn how to calculate the EBITDA margin, you can use the mathematical EBITDA margin formula which is as follows:

EBITDA Margin = (EBITDA / total revenue or net sales) x 100

For instance, if the EBITDA of a company is ₹40 lakhs and the total revenue stands at ₹2 crores, the EBITDA margin would be:

(₹40 lakhs / ₹2 crores) x 100 = 20%

What is a Good EBITDA Margin by Industry?

A good EBITDA margin is industry-specific. Some industries are capital-intensive and might incur higher operating costs. Similarly, newly formed companies might have higher operating costs compared to the revenue which drives the EBITDA margin down.

Usually, any margin that is positive and high is considered good. You must compare margins across companies in the same industry since their operating expenses would be similar. This would give you a good idea about which company is more profitable.

Benefits of EBITDA Calculator Online

The EBITDA margin calculator is a very helpful tool because of the various benefits that it provides. These benefits are as follows:

• You can calculate the EBITDA margin free of cost.
• The EBITDA margin is calculated instantly and accurately without the scope of human errors.
• You can calculate the EBITDA margin of multiple companies and compare the results to find the most profitable option.
• The EBITDA margin calculator helps you choose the most profitable company to invest in. Since the company is highly profitable, you might earn attractive dividends on your investment and also enjoy capital appreciation when the company's stocks rally.

Good EBITDA Margin Examples for 2022

Here are some companies that had the highest EBITDA margins in the financial year 2022-23.

Conclusion

The EBITDA margin of a company is a strong indicator of its profitability. When investing in a company, it is crucial to calculate its EBITDA margin and compare it with its peers. Choose a company that has the highest EBITDA margin to enjoy better returns in terms of both dividends and a rise in share prices. With the help of an EBITDA margin calculator, you get accurate calculations that empower you to make better financial decisions.