1. What is EBITDA?

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a measure of a company's operating performance. It provides insight into operational profitability before accounting and financial deductions.

2. How Does the Calculator Work?

The calculator uses the EBITDA formula:

Where:

• \( EBIT \) — Earnings Before Interest and Taxes (AUD)
• \( Depreciation \) — Depreciation expense (AUD)
• \( Amortization \) — Amortization expense (AUD)

Explanation: The formula adds back non-cash expenses (depreciation and amortization) to EBIT to show cash earnings from operations.

3. Importance of EBITDA Calculation

Details: EBITDA is widely used to compare profitability between companies and industries as it eliminates effects of financing and accounting decisions. It's particularly important in Australia for business valuation and financial analysis.

4. Using the Calculator

Tips: Enter EBIT, Depreciation, and Amortization amounts in Australian Dollars (AUD). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why use EBITDA instead of net income?
A: EBITDA provides a clearer picture of operational performance by excluding non-operational factors like taxes and capital structure.

Q2: What is a good EBITDA margin?
A: This varies by industry, but generally higher is better. Australian companies typically aim for 15-20%+ EBITDA margins.

Q3: Are there limitations to EBITDA?
A: Yes, it ignores capital expenditures and working capital needs, which can be significant especially in capital-intensive industries.

Q4: How does Australian accounting treat depreciation?
A: Australia follows AASB standards which align with IFRS for depreciation methods (straight-line, reducing balance, etc.).

Q5: Is EBITDA the same as cash flow?
A: No, EBITDA is an approximation of operating cash flow but doesn't account for changes in working capital or capital expenditures.