How to calculate ROI in debt investment ?



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Hi Binny , i am so confused with ROI in the module of how to raise money using debt! Return on investment is the return on the whole investment and not only on the equity rt? if it was ROE it makes sense that debt increases the return but how will it be for ROI? Can i have ur email id plz?

3 Answer(s)


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Hi Sujith, Sorry about the confusion. In this module we are indeed measuring ROE and I am referring it to as the ROI since from the Investors standpoint, his/her only investment is the equity part. The debt is typically taken on the company's books not the investors. So in this module everytime you hear ROI, I am actually referring to the ROE for the investor. Is that clear. My email id is binny@dezyre.com, but you could ask the questions on this forum itself for the benefit of the other students.

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Also Sujith in the most conventional sense ROE is calculated as Net Income come divided by Shareholders equity. In our case, since the only investment is the equity we use ROI to indicate the returns to the equity investor.

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