What Is Gross Margin?
Gross margin shows how much of each rupee of sales is left after the direct cost of making or buying what you sold.
Read guide →What Is EBITDA?
EBITDA stands for earnings before interest, taxes, depreciation and amortization. It shows how much a business earns from its core operations before financing choices, tax and non-cash charges are taken into account.
Lenders and investors often use it to compare businesses, because it removes differences in debt, tax and accounting for asset wear. It has limits, though: it ignores the cash you spend on equipment and the interest you must pay.
Formula
EBITDA = Revenue − COGS − Operating Expenses (excluding depreciation and amortization)
Example
Revenue ₹10,00,000, COGS ₹5,00,000 and operating expenses ₹2,50,000 give an EBITDA of ₹2,50,000, a 25% EBITDA margin.
Frequently asked questions
Is EBITDA the same as net profit?
No. Net profit is what remains after interest, tax, depreciation and amortization as well, so it is usually lower.
Why do investors look at EBITDA?
It gives a quick view of operating performance that is easier to compare across companies, but it should be read alongside cash flow and debt.
More guides
Revenue vs Profit
Revenue is the money you bring in. Profit is what you keep after costs.
Read guide →Gross Profit vs Net Profit
Gross profit subtracts only direct costs. Net profit subtracts everything.
Read guide →BizCalc provides calculators and educational information for general informational purposes only. Results are estimates and should not be considered financial, tax, accounting or investment advice.