Question - EBITDA / EBITDA
Why do we use EV/EBITAR (if a company has large rent expenditures), but whenever we are valuing a company that has a lot of D&A we use EBIT rather than EBITDA...so why does this principle not overlap with EBITDAR?
I think you are mixing the concepts slightly. The reason for using EV/EBITDAR is to compare the relative pricing between companies, such as airlines, regardless of the financing of the airplanes.
You may want to think more conceptually about the different metrics and their uses. If you think high-level about it, EBITDA is meant to serve as a proxy for free cash flow. When doing an LBO, you want to understand how much debt you can take on the company you are acquiring, often referenced in a multiple of EBITDA. However, if the company requires a lot of CAPEX each year to sustain the current revenue levels, you may not get permission from the bank to take on the debt you want, meaning that a multiple of EBIT may be a more suitable metric.
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