EBITDA margin


Equal to EBITDA divided by total revenue. EBITDA margin measures the extent to which cash operating expenses use up revenue.

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The EBITDA margin was useful in determining the nature of the relationship between our inputs and outputs also known as revenue versus costs.

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Comparing consecutive years' EBITDA margin values allows an investor to hypothesize a possible trajectory for a firm and see whether there is an efficient allocation of revenue.

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David took a look at his company's earnings before interest, taxes, depreciation, and amortization to calculate the EBITDA margin and see how much revenue their cash operating expenses was eating up the budget.

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