How to Calculate EBITDA from Income Statement

To calculate EBITDA is so important to the banker who provides debt and company who gets debt from financial institute. Banker will give debt to that company who is earning good money on their investment before interest and tax and depreciation. It is also helpful for company because if EBIDA is at high level, it can get loan at low rate. So, earning before interest, tax and depreciation is calculated by all the companies and debt providing companies.

Following are the main steps of Calculating EBITDA from Income Statement

If you have net income of the income statement in-which, you have deducted depreciation, amortization, interest and taxation, you have to add depreciatin, amortization, interest and taxation for finding EBITDA.

Following is its formula

EBITDA = Net Income after Dep., Interest and Tax + Depreciation + Amortization + Interest + Taxation

Following is its Example

For example, your net profit after depreciation, amortization, interest and tax which is shown in the income statement, is $ 14,300,000. Now, you have to add depreciation, amortization, interest and tax from this net profit and finally, you will get EBITDA amount. To add depreciation, amortization, interest and tax is necessary because with this, we can easily cancel already deducted amount of depreciation, amortization, interest and tax.Amortization is also depreciation on intangible assets. So, it will also cancel from our income statement's net profit.

From above $ 280,00,000 EBITDA amount, creditor can find, how much amount his debtor will pay him as interest on his given debt. He will not give any more debt if interest will be more than EBITDA, otherwise it will be risky deal for creditor.

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Accounting Education: How to Calculate EBITDA from Income Statement
How to Calculate EBITDA from Income Statement
Accounting Education
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