What happens to a company's EBITDA margins if its EBITDA and sales both decrease by 50%?

EBITDA margins are calculated by dividing EBITDA by total sales. When both EBITDA and sales decrease by the same percentage, the underlying relationship between them remains constant, meaning the ratio doesn't change.

For example, if a company has an EBITDA of $100 and sales of $500, the EBITDA margin is 20% (100/500). If both EBITDA and sales decrease by 50%, EBITDA becomes $50 and sales become $250. The EBITDA margin would still be 20% (50/250).

Therefore, unless there is a change in the relationship between EBITDA and sales, which is not the case here since both are decreasing proportionately, the EBITDA margin remains unchanged. This illustrates that the margin is a relative measure, unaffected by identical proportional changes in its components.