> For the complete documentation index, see [llms.txt](https://help.modelreef.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://help.modelreef.io/help/financial-outputs-and-valuation/ebitda-logic.md).

# EBITDA Logic

This article explains how **EBITDA** is calculated and used in Model Reef.

You will learn:

* How EBITDA is defined.
* How it is calculated from variables and mapping.
* How EBITDA is used in dashboards, reports and valuation work.

EBITDA is a key performance and valuation metric for many businesses.

## 1. EBITDA definition in Model Reef

In Model Reef, **EBITDA** is defined as:

```
EBITDA = Revenue minus COGS minus Opex minus Staff Costs
```

Where:

* Revenue consists of all Revenue variables.
* COGS consists of all COGS variables.
* Opex consists of all Opex variables.
* Staff Costs consists of all Staff variables.

Depreciation, amortisation, interest and tax are all excluded from EBITDA by definition.

## 2. EBITDA in the P\&L

{% stepper %}
{% step %}

### Revenue

Revenue is shown at the top.
{% endstep %}

{% step %}

### Subtract COGS

COGS is subtracted to give Gross Profit.
{% endstep %}

{% step %}

### Subtract Opex and Staff costs

Opex and Staff costs are subtracted from Gross Profit.
{% endstep %}

{% step %}

### EBITDA

The result is EBITDA.
{% endstep %}

{% step %}

### EBIT

Depreciation and Amortisation are then subtracted to give EBIT.
{% endstep %}
{% endstepper %}

Because the P\&L is fully generated from variables, EBITDA is always consistent with the underlying mapping and timing.

## 3. EBITDA in dashboards and reports

EBITDA is commonly used in:

* Dashboards
  * As a KPI card.
  * As a time series chart.
  * In scenario comparison view.
* Custom reports
  * Board or investor packs.
  * Lender covenant reporting.
  * Management performance reporting.

You can slice EBITDA by branch, scenario or period to understand which divisions and strategies are driving performance.

## 4. EBITDA and cashflow

EBITDA is an accrual based operating performance measure. To reach cashflow you need to adjust for:

* Changes in working capital.
* Tax.
* Capex.
* Debt and equity flows.

In the Cash Waterfall:

* EBITDA appears as a key intermediate line.
* Change in net working capital and tax are then subtracted.
* Capex and financing flows follow, leading to free cashflow measures.

This makes it easy to see the bridge from EBITDA to cash and then to equity value.

## 5. EBITDA in valuation

EBITDA is often used in valuation as:

* A reference metric for valuation multiples.
* The starting point for estimating free cashflows.
* A covenant or target in debt structuring.

Model Reef connects EBITDA to the valuation engine by:

* Using P\&L and cashflow outputs to compute FCFF and FCFE.
* Allowing you to create custom charts and reports that show EBITDA and free cashflow side by side.
* Supporting terminal value approaches based on EBITDA multiples if desired.

This provides a coherent path from operating performance to value.

## Related articles

* [Property Cash Flow (Rental/Lease)](/use-cases/real-estate-and-property/property-cash-flow-rental-lease.md)
* [Build a Forecast Accuracy Tracker](/how-tos/scenarios-and-planning/build-a-forecast-accuracy-tracker.md)
* [Gross Profit Logic](/help/financial-outputs-and-valuation/gross-profit-logic.md)
* [Autocomplete Behaviour](/syntax/formula-syntax/autocomplete-behaviour.md)