EBITDA Margin
Definition
EBITDA as a percentage of revenue, showing operating cash profitability before interest, tax, depreciation and amortization. It is widely used to compare businesses, though it ignores real capital costs.
Formula
EBITDA margin = EBITDA ÷ Revenue × 100
Related Terms in Financial Analysis
Operating Cash Flow
The cash a business generates from its normal operating activities during a period, before investing and financing flows. Positive operating cash flow shows the core business funds itself.
Free Cash Flow
The cash left after a business pays for the capital expenditure needed to maintain or grow its asset base. It is the cash genuinely available to repay debt, pay dividends or reinvest.
Current Ratio Analysis
Interpreting the current ratio — current assets divided by current liabilities — to judge whether a business can meet its short-term obligations. A ratio comfortably above one is generally healthier, though the ideal varies by industry.
Acid-Test Ratio
A stricter liquidity measure than the current ratio, excluding inventory from current assets because it may not convert quickly to cash. Also known as the quick ratio.
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