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What are steps involved in calculating EBITDA and EBITDA coverage ratio or How EBITDA and EBITDA ratio is calculated?
The solution is explained below −
EBITDA = Np+In+Ta+D+A EBITDA = 175000+20000+35000+8000 EBITDA= 238000/-
Here, Np=Net Profit, In=Interest, Ta=Taxes, D = Depreciation, A= Amortization
EBITDA= OI*+ D+ A EBITDA = (525000-200000-95000) + 8000 EBITDA = 238000/-
Here, OI* = Operating Income, D = Depreciation, A= Amortization
(*Operating income (OI) = total revenue – cost of goods sold – operating expenses)
EBITDA Coverage Ratio = (EBITDA+LP)/ (IP+PP+LP) EBITDA Coverage Ratio = (238000+15000)/ (5000+7500+15000) EBITDA Coverage Ratio = (253000)/ (27500) EBITDA Coverage Ratio = 9.2
Here, LP = Lease payments, IP= Interest payment, PP = Principal payments.
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