EBITDA Margin

Operating profit (revenue minus cost of goods sold and operating expenses) expressed as a percentage of revenue. Operating margin measures how efficiently a company converts revenue into profit from its core business activities before interest and taxes.

Revenue minus the cost of goods sold (COGS), expressed as a percentage of revenue. Gross margin indicates how efficiently a company produces its goods or delivers its services and determines how much revenue is available to cover operating expenses and generate profit.

Revenue minus variable costs, expressed as a total or per-unit figure. Contribution margin reveals how much each unit sold contributes to covering fixed costs and generating profit, and is a key input in unit economics analysis.

Earnings Before Interest, Taxes, Depreciation, and Amortisation. A widely used measure of a company's core operating performance that strips out financing decisions, tax jurisdictions, and non-cash charges, making it useful for comparing profitability across companies.

A modified version of EBITDA that strips out non-recurring, irregular, or non-cash items to present a clearer picture of ongoing operational performance. Adjusted EBITDA is commonly used in growth-stage company valuations where standard EBITDA may be distorted by one-off charges or share-based compensation.

Net income divided by total assets, indicating how efficiently a company generates profit from its asset base. ROA comparisons across firms should account for differences in intangible asset recognition, as companies with significant off-balance-sheet intangibles may appear more asset-light.

The profit margin that a hypothetical developer would expect to earn for undertaking the creation of an asset, reflecting compensation for development risk, time, and expertise. In intangible asset valuation under the cost approach, developer's profit is added to direct and indirect costs to arrive at the total cost that a market participant would incur.

The ratio of total purchased inputs (services, energy, and materials) to revenue, expressed as a percentage. Purchases intensity measures how dependent a business is on external inputs and how efficiently it converts purchased resources into value.

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What is the link between intangible assets and EBITDA?

Companies with strong intangible assets typically generate higher EBITDA margins because intangibles scale without proportional cost increases — driving higher revenue per employee and lower marginal costs.

What is EBITDA and why does it matter for valuation?

EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) strips out financing and accounting decisions to show a company's core operational profitability — it's the most common valuation metric in M&A.

What is Gross Margin and Contribution Margin?

Gross Margin = (Revenue − Cost of Goods Sold) / Revenue. Contribution Margin = (Revenue − Variable Costs) / Revenue. Both measure profitability at different levels of cost allocation.