Return on assets

Net profit divided by total assets. It measures how productively the whole asset base is used. Net profit is after interest, so a company that borrows more shows a lower figure on the same operations; to compare companies funded differently, add back after-tax interest first.

For a manufacturer earning ₹615 crore on ₹6,200 crore of assets, the return is 9.9%.

Return on assets comes into its own for banks, where the balance sheet is the business. For an Indian bank, a return on assets above 1% is respectable and above 1.5% is strong. Those lines are a local working range and not a law of banking: in Japan and much of Europe the whole distribution is lower, and a bank there can be soundly run at levels that would look weak here. For a software company the same numbers would be dismal, so the ratio is only ever compared within a sector, and only ever within a market.

For industrials, return on capital employed usually beats it.