Loading the player...

What is 'Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring or Rent Costs - EBITDAR'

Earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) is a non-GAAP indicator of a company's financial performance. Although EBITDAR does not appear on a company's balance sheet, it can be easily calculated using information from the balance sheet. The formula for calculating EBITDAR is earnings before interest and tax (EBIT) plus depreciation, amortization and restructuring or rent costs.

BREAKING DOWN 'Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring or Rent Costs - EBITDAR'

Another way of determining EBITDAR is revenue minus expenses plus 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 primarily used to analyze the performance of companies that have gone through restructuring or companies such as restaurants or casinos which have unique rent costs. It exists alongside EBIT and earnings before interest, tax, depreciation and amortization (EBITDA).

Difference Between EBIT and EBITDAR

EBIT appears on a company's balance sheet, and it consists of the company's revenue minus its expenses. However, interest and tax are not included in the expenses. For example, imagine a company earns $1 million in a year, and it has $400,000 in expenses including operating expenses, depreciation costs and related expenses. It pays $20,000 in interest and another $100,000 in taxes. Its net income for the year is $480,000. However, its EBIT is $600,000. This is net income plus interest and taxes.

Difference Between EBITDA and EBITDAR

Simply, the difference between EBITDA and EBITDAR is that the latter takes restructuring or rent costs into account. However, both of these metrics are used to compare the financial performance of two companies without taking their tax bracket into account or expenses the business incurred during previous 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 important for tax returns and accounting ledgers, these numbers can cloud a picture of a business's current financial state, and as a result, investors may want to consider the performance of a business without taking these expenses into account. Instead, the investor may prefer to only look at the business's current expenses.

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 was comparing two restaurants, one in New York City with very expensive rent costs and the other in Omaha with significantly lower rent costs. In order to compare those two businesses effectively, the investor excludes their rent costs, as well as interest, tax, depreciation and amortization.

Similarly, restructuring is excluded from this number 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.

RELATED TERMS
  1. Restructuring

    Restructuring is a significant modification made to the debt, ...
  2. Owners' Equivalent Rent (OER)

    Owners’ equivalent rent (OER) is the amount of rent that would ...
  3. Depreciation

    1. A method of allocating the cost of a tangible asset over its ...
  4. Fully Depreciated Asset

    A fully depreciated asset is a property, plant or piece of equipment ...
  5. Carrying Value

    An accounting measure of value, where the value of an asset or ...
  6. Operating Margin

    Operating margin is a measure of a company's profitability, and ...
Related Articles
  1. Trading

    How To Value Airline Stocks

    We explain what drives the stocks of airline companies and how best to assess their values.
  2. Investing

    10 Cities Where Rent Is Rising Fastest

    Rents are rising in 34 of the 35 largest U.S. metros, but salaries are not keeping pace. Here's where you're most likely to feel the pinch.
  3. Investing

    Pros and Cons of Renting vs. Owning a Home

    Owning a house might be an appealing idea, but it may have a lasting impact on your lifestyle. Learn more about other implications of rent vs. buying a home.
  4. Investing

    4 Reasons Why Renting a Home is a Wise Decision

    We've all heard that a home is a great investment, but is it really? In this article, we will look at four reasons why renting could be wiser than homeownership.
  5. 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.
  6. Investing

    Top 10 Places States Where It’s Cheaper to Rent than Own

    Is it cheaper to rent than own? Renting is generally more affordable, and here are the top 10 states in which that is most emphatically the case.
  7. Investing

    Reasons Renting Is Better Than Buying

    Owning a home is much more expensive than renting. Here are the places where the costs differ greatly.
  8. Taxes

    Top 10 Cities to Invest in Rental Properties

    With home ownership out of reach, many Millennials are opting to rent single-family homes, which has created an opportunity for investors.
  9. 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.
RELATED FAQS
  1. What's the difference between EBITDA, EBITDAR and EBITDARM?

    EBITDA, EBITDAR and EBITDARM are analytic indicators commonly used by management to evaluate the financial performance and ... Read Answer >>
  2. What is the difference between operating income and EBITDA?

    Read about the major differences between earnings before interest, taxes, depreciation and amortization (EBITDA) and operating ... Read Answer >>
  3. Does gross profit include depreciation or amortization?

    Understand the distinction between depreciation and amortization, and learn under which circumstances either type of expense ... Read Answer >>
  4. Can unearned rent be considered deferred revenue?

    Learn whether unearned rent can be considered deferred revenue. Understand what accounting practices are used to account ... Read Answer >>
  5. What is the difference between EBIT and cash flow from operating activities?

    Learn about the difference between earnings before interest and taxes and cash flow from operating activities in financial ... Read Answer >>
Hot Definitions
  1. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  2. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  3. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  4. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  5. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  6. Monte Carlo Simulation

    Monte Carlo simulations are used to model the probability of different outcomes in a process that cannot easily be predicted ...
Trading Center