Loading the player...

What is 'EBITDAR'

Earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) is a non-GAAP tool used to measure a company's financial performance. Although EBITDAR does not appear on a company's balance sheet, it can be calculated using information from the balance sheet. 


Another way of determining a business' earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) is to calculate revenue minus expenses. This calculation will exclude interest, taxes, depreciation, amortization, and restructure or rent costs. Depending on the company and the goal of the analyst, the indicator can either include restructuring costs or rent costs, but usually not both. 

EBITDAR is a metric used primarily to analyze the performance of companies which have gone through restructuring. It is also useful for businesses such as restaurants or casinos who have unique rent costs. It exists alongside earnings before interest and tax (EBIT) and earnings before interest, tax, depreciation, and amortization (EBITDA).


Earnings before interest and tax (EBIT), also referred to as operating income, is calculated with information from an income statement.  This metric excludes interest and taxes. For example, imagine the XYZ company earns $1 million in a year, and it has $400,000 in expenses which include operating expenses. XYZ will pay $20,000 in interest, $50,000 in rent expenses, and another $100,000 in taxes. Its EBIT is $550,000 ($1 million revenue - $400,000 operating expenses and $50,000 rent expenses).  However its EBITDAR is $600,000 ($1 million revenue - $400,000 operating expenses).  Notice the exclusion of interest and taxes for both. However, rent is excluded for the EBITDAR only.


Naturally, the difference between EBITDA and EBITDAR is that the latter excludes restructuring or rent costs. However, both metrics are utilized to compare the financial performance of two companies without considering their tax brackets or expenses from prior years. For example, when a business amortizes or depreciates an asset, it writes off a portion of the asset's cost each year, over several years. While essential for tax returns and accounting ledgers, these numbers may cloud the picture of a business's current financial state. As a result, investors want to consider the performance of a company without taking expenses into account. They may prefer to only look at the business's current liabilities.

EBITDAR doesn't take rent or restructuring into account because this metric seeks to measure a company's operational performance. For example, imagine an investor comparing two restaurants, one in New York City with expensive rent costs and the other in Omaha with significantly lower rent costs. To compare those two businesses effectively, the investor excludes their rent costs, as well as interest, tax, depreciation, and amortization.

Similarly, an investor may wish the exclusion of restructuring costs when a company has gone through a restructuring plan and has incurred costs from the plan. These costs, which are included on the income statement, are usually seen as nonrecurring and are excluded from EBITDAR to give a better idea of the company's ongoing operations.

  1. Rent Expense

    Rent expense is the cost incurred by a business to utilize property ...
  2. Rent Control

    Rent control is a price control that limits the amount a property ...
  3. Economic Rent

    An excess payment made to or for a factor of production over ...
  4. Restructuring Charge

    A restructuring charge is a one-time cost that must be paid by ...
  5. EBITDA - Earnings Before Interest, ...

    EBITDA stands for earnings before interest, taxes, depreciation ...
  6. IRS Publication 527 - Residential ...

    An Internal Revenue Service (IRS) document providing tax information ...
Related Articles
  1. Investing

    The Complete Guide to Real Estate Renting

    Everything you need to know about renting property.
  2. Investing

    Buying vs. Renting in the San Francisco Bay Area

    Buying vs. renting in the San Francisco Bay Area is a conundrum: Both are pricey. How to decide.
  3. Managing Wealth

    Rent vs. Buy: It’s Different for Expensive Property

    For multi-million dollar homes, renting often nets out as costing less than the expenses/other financials of buying a comparable property.
  4. Personal Finance

    Buy or Keep Renting: What's the Best Choice?

    Here's how to determine whether renting or buying a home is best for you.
  5. Personal Finance

    Easy Ways to Cut Rental Costs

    If rent payments are crippling your finances, read on to learn how to save money.
  6. Investing

    To Rent Or To Buy? The Financial Issues

    Thinking of buying a home? There are several things you should consider before purchasing a home. For example, look at the initial and ongoing costs, as well as the putative benefits.
  7. Investing

    Where Rents Are Rising Most (Or Not So Much)

    If you’re in the market for rental housing, rents are rising more slowly in major metro areas; secondary-market rents, however, are growing faster.
  1. How are EBITDA, EBITDAR, and EBITDARM different?

    EBITDA, EBITDAR, and EBITDARM all measure the profitability of a company. However, each metric takes into account different ... Read Answer >>
  2. How do I calculate an EBITDA margin using Excel?

    Learn about the EBITDA (earnings before interest, tax, depreciation and amortization) profit margin and how to use Microsoft ... Read Answer >>
  3. What is the difference between operating margin and EBITDA

    Understand the key differences between, and purposes of, two measures of profitability that companies use: operating profit ... Read Answer >>
  4. What is the formula for calculating EBITDA?

    EBITDA measures the profitability of a company by stripping out various items from the income statement, but the two formulas ... Read Answer >>
Hot Definitions
  1. Socially Responsible Investment - SRI

    Socially responsible investing looks for investments that are considered socially conscious because of the nature of the ...
  2. Business Cycle

    The business cycle describes the rise and fall in production output of goods and services in an economy. Business cycles ...
  3. Futures Contract

    An agreement to buy or sell the underlying commodity or asset at a specific price at a future date.
  4. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  5. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  6. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
Trading Center