Return On Debt - ROD
Definition of 'Return On Debt - ROD'
1. A measure of a company's performance or net income as related to the amount of debt it has issued.
2. The amount of profit generated for each dollar that a company holds in debt.
3. A necessary factor when using the adjusted present value (APV) discounted cash flow method for valuing levered assets. The APV method is often used in a leveraged buyout as a way of valuing a firm that has a changing capital structure.
Investopedia explains 'Return On Debt - ROD'
Return on debt (ROD) is a complex financial modeling skill and not a commonly used financial reporting factor.
Companies that carry significant amounts of debt relative to capital and/or assets are more at risk during an economic downturn when earnings are likely to decline and credit measures may be tightened.