Understanding EBITA: The Difference Between Revenue and Profit

For any business owner, it’s important to understand your company’s financials, including EBITA. EBITA is a valuable metric for determining a company’s profitability and overall financial health. Here, I will explain what EBITA is, how to calculate it, and how it differs from EBITDA.

Understanding EBITA_ The Difference Between Revenue and Profit

What is EBITA?

EBITA stands for Earnings Before Interest, Taxes, and Amortization. It is a financial metric that measures a company’s operating income before the deduction of interest expenses, taxes, and amortization. Essentially, EBITA shows the profit a company generates from its operations before other expenses are taken into account.

How to Calculate EBITDA?

To calculate EBITDA, you start with a company’s net income and add back interest, taxes, depreciation, and amortization expenses. The formula for EBITDA is as follows: EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization.

EBITDANet Income + Interest + Taxes + Depreciation + Amortization

Interest Coverage Ratio: A Key Measure of Financial Health!

What is a Contingent Beneficiary? Understand It In Detail


EBITDA and EBITA are similar metrics, but they differ in that EBITDA includes depreciation, while EBITA does not. Depreciation is a non-cash expense that can significantly impact a company’s financials, and excluding it can provide a clearer picture of a company’s profitability from its core operations.

Is 20% a good EBITDA?

There is no one-size-fits-all answer to this question since what is considered a good EBITDA varies by industry. However, generally speaking, an EBITDA margin of 20% or higher is considered good, while a margin of 10% or less is considered poor.

EBITDA MarginIndustry Standard
20% or higherGood
10% or lessPoor

Is EBITA revenue or profit?

EBITA is a measure of profit, not revenue. It shows a company’s earnings from its core operations, without taking into account other expenses such as interest, taxes, and amortization.

What is the 40% rule EBITDA?

The 40% rule is a benchmark used in the valuation of businesses that are generating EBITDA. It suggests that the selling price of a business should be around 40% of its EBITDA. However, this is just a rule of thumb and should not be the sole basis for determining a business’s value.

What is considered a bad EBITDA?

Again, what is considered a bad EBITDA varies by industry. However, generally speaking, an EBITDA margin of less than 10% is considered poor, and a margin of less than 5% is considered very poor.

EBITDA MarginInterpretation
Less than 5%Very Poor
Less than 10%Poor
Greater than 10%Acceptable/Good


I can say from my experience that EBITA is a valuable financial metric for measuring a company’s profitability. It provides insights into a company’s core operations by excluding non-operational expenses such as interest, taxes, and amortization. While EBITA and EBITDA are similar metrics, they differ in that EBITDA includes depreciation. By understanding EBITA, business owners can gain a better understanding of their company’s financial health and make informed decisions about its future.


I'm a certified former finance and wealth consultant. I have always been big reader and thinker about finance and wealth. Writing essay on finance and wealth is always been my core interested area which has motivated me to share my thoughts and ideas here. Keep spreading finance and wealth awareness across the world.

Leave a Reply

Your email address will not be published. Required fields are marked *