EBITDAR

EBITDAR stands for earnings before interest, taxes, depreciation, amortization and rent (some companies use the R for restructuring costs instead). It is EBITDA with rent expense added back.

The formula is:

It is used mostly in industries where some companies own their assets and others lease them, such as airlines, hotels, restaurants and retailers. An airline that leases its planes records rent, while one that owns them records depreciation and interest instead. Adding rent back puts both on the same footing.

Rent is still a cash cost the company must pay every year, so a strong EBITDAR does not mean the business can ignore its leases. Check lease commitments alongside debt when judging how much a company owes.