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 CostsWhere:
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
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.
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