EBITDA to sales ratio
Definition of 'EBITDA to sales ratio'A financial metric used to assess a company's profitability by comparing its revenue with earnings. More specifically, since EBITDA is derived from revenue, this metric would indicate the percentage of a company is remaining after operating expenses.Sometimes referred to as "EBITDA margin". Calculated as: |
|
Investopedia explains 'EBITDA to sales ratio'For example, if XYZ Corp's EBITDA is $1 billion and its revenue is $10 billion, then its EBITDA to sales ratio is 10%. Generally, a higher value is appreciated for this ratio as that would indicate that the company is able to keep its earnings at a good level via efficient processes that have kept certain expenses low.However, when comparing company's EBITDA margin, make sure that the companies are in related industries as different size companies in different industries are bound to have different cost structures, which could make comparisons irrelevant. |
Related Definitions
Articles Of Interest
-
Analyze Investments Quickly With Ratios
Make informed decisions about your investments with these easy equations. -
A Look At Corporate Profit Margins
Take a deeper look at a company's profitability with the help of profit margin ratios. -
A Clear Look At EBITDA
This measure has its benefits, but it can also present earnings through rose-colored glasses. -
EBITDA: Challenging The Calculation
This measure has a bad rap, but it's still a valuable tool when used appropriately. -
Morningstar's Stewardship Grade Scores Big
Morningstar's service gives investors an idea how well fund companies are safeguarding their interests. -
Take Control With Investing Absolutes
Uncover the three things most good stocks have in common: performance, profitability and value. -
Ratio Analysis Tutorial
If you don't know how to evaluate a company's present performance and its possible future performance, you need to learn how to analyze ratios. -
Weighted Average Cost Of Capital (WACC)
Weighted average cost of capital may be hard to calculate, but it's a solid way to measure investment quality -
Analyzing Operating Margins
Find out how to put this important component of equity analysis to work for you. -
EBITDA
Otherwise known as Earnings Before Interest, Taxes, Depreciation and Amortization. Learn more about this indicator of a company's financial performance.
Free Annual Reports