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. Rent Control

    A price control that limits the amount a property owner can charge ...
  2. Restructuring Charge

    A one-time cost that must be paid by a company when it reorganizes. ...
  3. Earnings Before Interest, Taxes, ...

    A measure of a company's financial performance that looks at ...
  4. Earnings Before Interest, Tax and ...

    An indicator of a company's financial performance, which is calculated ...
  5. Depreciation

    1. A method of allocating the cost of a tangible asset over its ...
  6. Bonus Depreciation

    A bonus depreciation is a tax relief that allows a business to ...
Related Articles
  1. Investing

    The Complete Guide To Real Estate Renting

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

    The True Costs of Buying Vs. Renting a Home

    The full costs of renting versus buying a home, particularly a high-end one, may come as a surprise.
  3. 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.
  4. Insurance

    Can You Make Money Renting Your Property?

    Current market conditions may make your home a tough sell. It could be time to consider renting your property until a profitable sale is possible.
  5. Investing

    Renting vs. Owning: Which is Better for You?

    Despite the conventional wisdom, renting might make more financial sense than you think.
  6. Taxes

    EBIT (Earnings Before Interest and Taxes)

    Earnings before interest and taxes, or EBIT, takes a company’s revenue, or earnings, and subtracts its cost of goods sold and operating expenses.
  7. Investing

    Depreciation

    Amortization and depreciation are two ways to prorate the cost of an asset's life. Learn more about the latter and how it it's calculated.
  8. 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.
  9. 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.
RELATED FAQS
  1. What is the tax impact of calculating depreciation?

    Understand the tax implications of a company's depreciation. Learn how differences in accounting methods change the amount ... Read Answer >>
  2. 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 >>
  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. How do I calculate an EBITDA margin using Excel?

    Learn about the EBITDA profit margin and how to use Microsoft Excel to calculate this profitability metric using data from ... Read Answer >>
  5. What are the most common operating expenses for an online business?

    Learn about the common expenses of online businesses and find out about some of the tax implications of new business expenses ... 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. Promissory Note

    A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on ...
  3. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Absolute Advantage

    The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost ...
  6. Nonce

    Nonce is a number added to a hashed block, that, when rehashed, meets the difficulty level restrictions.
Trading Center