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Return on debt

Return on debt

Description

Return on debt (ROD) is a ratio, which compares company's net earnings with the amount of long term debt. This ratio shows the amount of net earnings that is generated for each dollar that a company holds in debt. Data to calculate this ratio is collected from the income statement and balance sheet.

Norms and limitations

Companies with a very low value of ROD can face difficulties while applying for loans.

During the economic crisis, low value of ROD indicates potential insolvency of the company which might lead to bankruptcy.

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