Why is EBITDA margin important?

The EBITDA margin helps in comparing the relative profitability of two or more businesses of various sizes operating in the same sector. When computing the EBITDA, excluding costs related to depreciation and amortization from the revenue is essential.

How is EBITDA margin calculated?

EBITDA margin is calculated by dividing EBITDA by total revenue. EBITDA margin lets investors and financial analysts easily compare the profitability of multiple companies in the same sector or industry. However, it isn't the best measurement for all businesses.

What is the difference between operating margin and EBITDA?

Operating margin measures a company's profit after paying variable costs but before paying interest or tax. EBITDA, on the other hand, measures a company's overall profitability, but it may not take into account the cost of capital investments such as property and equipment.