1. EBITA
Definition:
An EBITDA margin is a measurementofa company's earningsbefore interest, taxes,depreciation,
and amortization as a percentage of its total revenue.The formula for EBITDA margin is:
EBITDA Margin= EBITDA/Total Revenue
HOW IT WORKS (EXAMPLE):
The formula for EBITDA is:
EBITDA = EBIT + Depreciation+ Amortization.
In accounting,EBIT marginisa measure of an organization'sprofitwhichisfoundasearningsbefore
interestandtax(EBIT) dividedbynetrevenue.Ithelpstoidentifythe organizationyearlygrowth.
Formula:
EBIT = R - E EBIT Margin = EBIT / R Taxable Income = EBIT - I Tax Amount = Taxable Income x T Net
Income = Taxable Income - Tax AmountProfit Margin = NetIncome / R
Where,
R = SalesRevenue E= OperatingExpensesI= InterestPaidT= Tax Rate
Example :
A companyhas salesof $500000 withoperatingcostsof $450000, interestpaidof $6000 and a tax rate
of 30%. Calculate the EBIT,NetIncome,and ProfitMargin.
Given:
SalesRevenue (R) =$500000 OperatingExpenses(E) =$450000 InterestPaid(I) =$6000 Tax Rate (T) =
30% = 0.3
To Find :
EarningsBefore InterestandTaxes,NetIncome andProfitMargin
Solution:
EBIT = R - E = $500000 - $450000) = $50000 EBIT Margin = EBIT / R = ($50000 / $500000) x 100 = 10 %
Taxable Income = EBIT - I = $50000 - $6000 = $44000 Tax Amount= Taxable Income x T = $44000 x 0.3 =
$13200 NetIncome = Taxable Income - Tax Amount= $44000 - $13200 = $30800 ProfitMargin = Net
Income / R = ($30800 / $500000) x 100 = 6.16 %
