[Groty]

Legend has it that EBITDA became a popular metric when John Malone was trying to finance the emerging cable industry 40 years ago. He convinced TCI's banks that building out the cable infrastructure was largely a "one time" CapEx investment. He argued that after the "one time" CapEx investment is made, TCI will be rolling in cash, but GAAP earnings will be negative due to the huge depreciation expense. So negative GAAP earnings didn't reflect TCI's ability to service its debt. Instead, the bankers should focus on the positve cash flow being generated. The banks bought his pitch and EBITDA was born. To this day, the cable industry remains very capital intensive, so Malone sold the banks a bit of a pig in a poke. The story was told to me by the chief credit officer of one of NYC's largest banks that financed Malone and other early cable industry pioneers.

As for retailers, EBITDAR is often used to measure retailer's cash flow. It's calculated the same way as EBITDA, but rent expense is added. Analysts will often create an "adjusted debt" figure to include an estimate for the present value of minimum lease obligations.