Return on Debt Calculator

The Return on Debt Calculator measures a company's ability to generate profit from its debt. A higher ROD indicates more efficient use of debt to generate earnings.

Input Parameters

Calculation Results

Calculation Formula

Return on Debt (ROD) = EBIT / Total Debt

Where:
EBIT = Earnings Before Interest and Taxes
Total Debt = Short-term debt + Long-term debt

Calculation Results

Return on Debt (ROD):

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ROD as Percentage:

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Return on Debt Calculator Calculator Usage Guide

Learn how to use the Return on Debt Calculator and understand its significance in financial analysis

How to Use This Calculator

  1. Enter the company's Earnings Before Interest and Taxes (EBIT) in the first input field.
  2. Enter the company's total debt (including both short-term and long-term debt) in the second input field.
  3. Click the "Calculate" button to compute the Return on Debt.
  4. The calculator will display the ROD ratio and its percentage form.

Understanding Return on Debt (ROD)

Return on Debt (ROD) is a financial metric that measures a company's ability to generate profit from its debt. It indicates how effectively a company is using debt to generate earnings.

Interpreting Results

  • A higher ROD indicates that the company is generating more profit per unit of debt, suggesting efficient use of debt.
  • A lower ROD may indicate that the company is not using its debt effectively to generate earnings.
  • Compare the ROD with industry averages to assess whether the company is performing well relative to its peers.

Example

For example, if a company has an EBIT of $500,000 and total debt of $2,000,000, the ROD would be 0.25 or 25%. This means the company generates 25 cents in profit for every dollar of debt.

Limitations

While ROD is a useful metric, it should not be used in isolation. Consider it alongside other financial ratios and the company's overall financial health for a comprehensive analysis.