what does the ebitda to sales ratio tell you 
the purpose of ebitda is to report earnings while exlcluding certain expenses that are considered uncontrollable ebitda provides deeper insight into the operational efficiency of an organization based on only those costs management can control the ebitda to sales ratio divides the ebitda by a company s net sales a ratio equal to 1 implies that a company has no interest taxes depreciation or amortization it is thus virtually guaranteed that the calculation of a company s ebitda to sales ratio will be less than 1 because of the deduction of those expenses in the numerator as a result the ebitda to sales ratio should not return a value greater than 1 a value greater than 1 is an indicator of a miscalculation still a good ebitda to sales ratio is a number higher in comparison with its peers ebitda to sales can be construed as a liquidity measurement because a comparison is being made between the total revenue earned and the residual net income before certain expenses showing the total amount a company can expect to receive after operating costs have been paid although this is not a true sense of the concept of liquidity the calculation still reveals how easy it is for a business to cover and pay for certain costs limitations of the ebitda to sales ratiothe ebitda to sales ratio for a given company is most useful when comparing to similar sized companies within the same industry to one another because different companies have different cost structures across industries the ebitda to sales ratio calculations won t tell much during comparison if used to compare against industries with different cost structures for example certain industries may experience more favorable taxation due to tax credits and deductions these industries incur lower income tax figures and higher ebitda to sales ratio calculations another aspect related to the usefulness of the ebitda to sales ratio concerns the use of depreciation and amortization methods because companies can select different depreciation methods ebitda to sales ratio calculations eliminate the depreciation expense from consideration to improve consistency between companies finally the exclusion of debt interest has its drawbacks when measuring the performance of a company companies with high debt levels should not be measured using the ebitda to sale ratio since large and regular interest payments should be included in the financial analysis of such companies 