EBITDA Margin

EBITDA Margin is a financial metric that measures a company's operating profitability by looking at its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) as a percentage of its total revenue.

EBITDA Margin is calculated by dividing a company's EBITDA by its total revenue, then multiplying by 100 to express the result as a percentage. Higher EBITDA Margin indicates that a company is generating more profit per dollar of revenue and is better positioned to cover its operating expenses and reinvest in its business.

Example:

Let's say that XYZ Company has an EBITDA of $500,000 and total revenue of $2,000,000 in a given year. To calculate XYZ Company’s EBITDA Margin, we would divide the EBITDA by the total revenue and then multiply by 100:

EBITDA Margin = (EBITDA / Revenue) x 100 

EBITDA Margin = ($500,000 / $2,000,000) x 100 

EBITDA Margin = 0.25 x 100 

EBITDA Margin = 25%

This means that XYZ Company's EBITDA Margin for the year is 25%. This indicates that for every dollar of revenue generated by the company, it was able to earn 25 cents in EBITDA before accounting for other expenses such as interest, taxes, depreciation, and amortization.