EBITDA margin

EBITDA margin divides earnings before interest, taxes, depreciation, and amortization by revenue. It strips out non-cash charges (D&A) and capital-structure effects (interest), producing a profitability lens that is more comparable across firms with different capex profiles and leverage. EBITDA margin is the dominant comparative metric in M&A, leveraged finance, and capital-heavy industries. Its weakness is the well-known one: depreciation is not an accounting fiction for most businesses — it is a real cost of replacing the asset base — and a 30% EBITDA margin on a capex-heavy business does not survive contact with maintenance capital expenditures the way a 30% EBITDA margin on a software business does. We pair EBITDA margin with EBIT margin (which reintroduces D&A) and with the EBITDA-to-FCF conversion ratio to see whether reported profitability translates into actual cash. EBITDA margins should be interpreted within capital-intensity bands, never absolute.