## About Return On Debt Calculator (formula)

The Return on Debt (ROD) Calculator helps you understand how effectively a company is using its long-term debt to generate profits. It does this by calculating a percentage that represents the return earned on the amount of debt the company has.

**ROD (%) = (Annual Net Income / Average Long-Term Debt) * 100**

**Annual Net Income:**This is the company’s yearly profit after all expenses and taxes.**Average Long-Term Debt:**This represents the average amount of long-term debt the company owes over a period, typically calculated as the sum of long-term debt at the beginning and end of the period divided by 2.

The ROD is expressed as a percentage, and it provides insight into how efficiently a company is using its debt to generate profits. A higher ROD indicates that the company is generating more profit relative to its debt, which is generally considered a positive sign. Conversely, a lower ROD suggests that the company may not be using its debt as effectively to generate profits.