How to Calculate EBITDA in Excel: A Step-by-Step Guide

How to Calculate EBITDA in Excel

For stock investors and analysts, understanding and computing EBITDA efficiently is crucial in assessing a company's operational profitability. Excel becomes an invaluable tool in this endeavor. In this guide, we'll simplify the process of calculating EBITDA in Excel, ensuring that you can swiftly derive insights and make informed decisions on your portfolio. Dive in to master this key metric and enhance your stock analysis capabilities.

What is EBITDA, and why does it matter?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a profitability measure that shows how much profit a company made before taking into account the costs associated with financing (interest), taxes, depreciation, and amortization. EBITDA is widely used by investors to evaluate the performance of companies in different industries because it allows users to compare companies without considering their financing and capital structures.

EBITDA provides a clearer picture of a business's core profitability. For investors and financial analysts, it's a useful tool to compare the profitability of different companies without getting influenced by accounting methods or tax environments.

Breaking Down EBITDA

Here's a breakdown of the EBITDA components:

  • Earnings: A company's net profit or loss.
  • Interest: The cost of borrowed capital or earnings from deposited funds.
  • Taxes: Allocated funds for various tax-related expenses.
  • Depreciation: The allocation of tangible asset costs over their lifespan.
  • Amortization: Allocating the costs of intangible assets over time.

The EBITDA Formula

It's essential to grasp the fundamental EBITDA formula before diving into Excel calculations. This formula not only guides accurate calculations but also uncovers the underlying financial story.

Formula:

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization

Understanding the Implications:

  • Why add these components back to Net Income? At its core, EBITDA aims to measure the profitability of the company's core business operations, devoid of external factors like financing structure (interest), government tax policies (taxes), and wear and tear or aging of assets (depreciation & amortization).
  • A Measure of Operational Performance: By focusing on these components, EBITDA provides a clearer picture of how well a business's core operations are performing. It abstracts external and often uncontrollable factors, offering a consistent metric that's comparable across industries and time frames.

Now, with the basic understanding of the EBITDA formula, we can proceed to apply this in Excel, ensuring accurate representations and interpretations.

How to calculate EBITDA in Excel

Here's how to calculate EBITDA in Excel:

  1. Start a new Excel file and label the first worksheet "EBITDA".
  2. Input your company's figures for profit or loss, interest, tax, depreciation, and amortization.
  3. Use the formula: EBITDA=[Net Income]+[Interest]+[TaxExpense]+[Depreciation/Amortization]
How to calculate EBITDA in Excel

This formula will give your company's EBITDA, a crucial metric for comparing companies across industries and gauging financial health.

Automating the EBITDA Formula

With Wisesheets in Excel and Google Sheets, you can automatically retrieve EBITDA and other financial metrics. For instance, to fetch Apple's 2021 EBITDA, simply input:

=WISE("AAPL", "EBITDA",2021)

Automating the EBITDA Formula

Benefits of Using Wisesheets for EBITDA:

  • Time Efficiency: Avoid manual formula input with Wisesheets' faster, automated approach.
  • Accuracy: Minimize human errors like incorrect formulas or overlooked components.
  • Comprehensive Financial Metrics: Wisesheets supports a range of financial metric calculations, making financial analysis in Excel more holistic.

EBITDA Examples

Let's manually calculate EBITDA for Amazon (AMZN) and Microsoft (MSFT):

  1. Amazon (AMZN) 2021:
    • Data from Amazon's 2021 Income Statement:
      • Net Income: $33 billion
      • Interest Expense: $1 billion
      • Tax Expense: $4 billion
      • Depreciation and Amortization: $34 billion
    • EBITDA Calculation: EBITDA = $33B + $1B + $4B + $34B = $72 billion

So, Amazon's 2021 EBITDA is around $72 billion.

  1. Microsoft (MSFT) 2020:
    • Data from Microsoft's 2020 Income Statement:
      • Net Income: $44 billion
      • Interest: $2 billion
      • Taxes: $8 billion
      • Depreciation and Amortization: $12 billion
    • EBITDA Calculation: EBITDA = $44B + $2B + $8B + $12B = $66 billion

Microsoft's 2020 EBITDA stands at roughly $66 billion.

EBITDA Screener in Excel

An EBITDA-specific screener can refine your financial analysis, especially when contrasting operational profitability among several companies. By leveraging Wisesheets, you can craft a precise EBITDA screener in Excel.

EBITDA Screener in Excel

Steps:

  1. Initialize Your Spreadsheet: Begin with your company stock tickers. Ensure they match Yahoo Finance's ticker system.
  2. Opt for EBITDA as Your Main Parameter: For this screener, concentrate solely on EBITDA, though Wisesheets offers a plethora of other parameters.
  3. Access WISE Screener: Navigate to the WISE Screener inside the Wisesheets add-on.
  4. Input Your Tickers: Highlight your tickers and click the 4-square icon.
  5. Pick EBITDA: In the parameters area, choose or type "EBITDA".
  6. Specify the Desired EBITDA Timeframe: Options include Trailing Twelve Months (TTM), Last Fiscal Year (LY), or Last Fiscal Quarter (LQ).
  7. Fetch the EBITDA Data: Click "Get Data". The screener will fill in your EBITDA values for each ticker.
  8. Management & Analysis: You can refresh or manage the created EBITDA bucket and use Excel's tools to rank companies, spot outliers, or figure out industry averages.

Conclusion

EBITDA is an essential metric to gauge companies' operational profitability. It's invaluable for cross-industry performance comparisons and financial health evaluations. You can manually compute the EBITDA formula in Excel using income statement figures or automate it with Wisesheets. This add-on not only delivers the EBITDA metric but also facilitates creating an EBITDA screener for easy company comparisons.

Happy Investing!

Hello! I'm a finance enthusiast who fell in love with the world of finance at 15, devouring Warren Buffet's books and streaming Berkshire Hathaway meetings like a true fan.

I started my career in the industry at one of Canada's largest REITs, where I honed my skills analyzing and facilitating over a billion dollars in commercial real estate deals.

My passion led me to the stock market, but I quickly found myself spending more time gathering data than analyzing companies.

That's when my team and I created Wisesheets, a tool designed to automate the stock data gathering process, with the ultimate goal of helping anyone quickly find good investment opportunities.

Today, I juggle improving Wisesheets and tending to my stock portfolio, which I like to think of as a garden of assets and dividends. My journey from a finance-loving teenager to a tech entrepreneur has been a thrilling ride, full of surprises and lessons.

I'm excited for what's next and look forward to sharing my passion for finance and investing with others!

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