Return On Debt - ROD

AAA

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.

RELATED TERMS
  1. Levered Free Cash Flow

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

    A financial ratio that measures the extent of a company’s or ...
  3. Debt/Equity Ratio

    A measure of a company's financial leverage calculated by dividing ...
  4. Debt-To-Capital Ratio

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

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  6. Net Debt

    A metric that shows a company's overall debt situation by netting ...
RELATED FAQS
  1. What are some examples of a deferred tax liability?

    In the United States, laws allow companies to maintain two separate sets of books for financial and tax purposes. Because ... Read Full Answer >>
  2. Why is the use of contra accounts so important for maintaining ledgers?

    Contra accounts have been used in financial accounting to verify the balance of another corresponding account since Renaissance ... Read Full Answer >>
  3. What impact did the Sarbanes-Oxley Act have on corporate governance in the United ...

    After a prolonged period of corporate scandals involving large public companies from 2000 to 2002, the Sarbanes-Oxley Act ... Read Full Answer >>
  4. How is deferred revenue treated under accrual accounting?

    In accrual accounting, deferred revenue, or unearned revenue, represents a liability on the balance sheet recorded on funds ... Read Full Answer >>
  5. What are some of the advantages and disadvantages of absorption costing?

    Companies must choose between using absorption costing or variable costing in their accounting systems. There are advantages ... Read Full Answer >>
  6. What are Manchester United's (MANU) largest revenue sources?

    Manchester United is one of the most popular U.K. soccer teams. Its principal stadium is Old Trafford, located in the heart ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  2. Markets

    ROA And ROE Give Clear Picture Of Corporate Health

    Both measure performance, but sometimes they tell a very different story. This is why they’re best used together.
  3. Investing Basics

    What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how to check the score.
  4. Investing

    Debt Reckoning

    Learn about debt ratios and how to use them to assess a company's financial health. You could save a lot of money!
  5. Bonds & Fixed Income

    Uncovering Hidden Debt

    Understand how financing through operating leases, synthetic leases, and securitizations affects companies' image of performance.
  6. Bonds & Fixed Income

    Taking Advantage Of Corporate Decline

    A bankrupt company can provide great opportunities for savvy investors.
  7. Economics

    What is a Share Premium Account?

    The share premium account is an equity account found on a company’s balance sheet.
  8. Investing

    What is Comprehensive Income?

    Comprehensive income is a part of the owners’ equity section of the balance sheet.
  9. Economics

    What Does Debit Mean?

    Debit is an accounting term used to refer to the left side of an accounting journal entry. Each debit must be offset by an equal credit entry.
  10. Investing Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.

You May Also Like

Hot Definitions
  1. Fracking

    A slang term for hydraulic fracturing. Fracking refers to the procedure of creating fractures in rocks and rock formations ...
  2. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  3. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  4. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  5. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  6. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
Trading Center