Return on capital employed

Operating profit divided by capital employed, where capital employed is total assets minus current liabilities, or approximately equity plus debt. The two differ because short-term borrowings and current maturities of debt sit in current liabilities, and long-term liabilities that are not debt, such as deferred tax and provisions, count in the first measure but not the second.

If a firm earns ₹960 crore of operating profit on ₹4,300 crore of capital employed, it returns 22.3%.

Prefer it to return on equity because both the numerator and the denominator are measured before financing. Operating profit belongs to lenders and owners together, and capital employed is what both of them put in, so the ratio measures the business and leaves the balance sheet structure out. Two competitors with the same operations and different debt loads report the same figure here and very different returns on equity. That's the behaviour you want from a measure of operating quality.

Definitions in circulation differ. Some use earnings before interest and tax and some use it after tax. Some take year-end capital and some the average of opening and closing. Comparisons only mean anything when both sides are computed the same way, so build the series yourself and don't collect it from screeners.

State your definition once, then keep it.