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.

BREAKING DOWN '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.

  1. Debt Ratio

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  2. Debt/Equity Ratio

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  3. Levered Free Cash Flow

    The free cash flow that remains after a company has paid its ...
  4. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  5. Debt-To-Capital Ratio

    A measurement of a company's financial leverage, calculated as ...
  6. Net Debt

    A metric that shows a company's overall debt situation by netting ...
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