EBITDA Margin

Think of margin as a sidekick. Profit has a margin. So does EBITDA.

Margin compares a company's bottom line to its top line. For profit margin, it's basically how much of the company's revenue turns into profit. The margin is determined by dividing the company's profit figure by its revenue figure.

EBITDA margin works the same way.

EBITDA is a special way of determining a company's bottom line that leaves out certain items. Specifically, the term stands for "Earnings Before Interest, Taxes, Depreciation, and Amortization."

To figure out the margin, use the same formula as with regular vanilla profits: divide EBITDA by revenue. That gives you the EBITDA margin.

The higher the number, the better. A high number means that a larger portion of revenue are generating profit, or EBITDA (and a smaller percentage is getting eaten up by pesky expenses, like salaries and materials).