EBITDA Margin

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DEFINITION of 'EBITDA Margin'

A measurement of a company's operating profitability. It is equal to earnings before interest, tax, depreciation and amortization (EBITDA) divided by total revenue. Because EBITDA excludes depreciation and amortization, EBITDA margin can provide an investor with a cleaner view of a company's core profitability.

BREAKING DOWN 'EBITDA Margin'

A firm with revenue totalling $125,000 and EBITDA of $15,000 would have an EBITDA margin of $15,000/$125,000 = 12%. The higher the EBITDA margin, the less operating expenses eat into a company's bottom line, leading to a more profitable operation.

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RELATED FAQS
  1. What advantages does EBTIDA-margin have over other profitability ratios?

    The advantages that EBITDA margin has over other profitability ratios is that it measures a company's financial performance ... Read Full Answer >>
  2. Why is the EBITDA margin considered to be a good indicator of a company's financial ...

    The EBITDA margin is a considered to be a good indicator of a company's financial health, because it evaluates a company's ... Read Full Answer >>
  3. What is the difference between EBITDA margin and profit margin?

    Corporate accounting is required to adhere to the standards and practices collectively referred to as the generally accepted ... Read Full Answer >>
  4. Over what sort of time span should I be examining a company's EBITA margin?

    As with all profitability ratios, a company's earnings before interest, taxes, depreciation and amortization (EBITDA) margin ... Read Full Answer >>
  5. What items are considered liquid assets?

    A liquid asset is cash on hand or an asset that can be readily converted to cash. An asset that can readily be converted ... Read Full Answer >>
  6. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
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