Return on capital employed

Operating profit divided by capital employed, where capital employed is total assets minus current liabilities, or equivalently equity plus debt.

A firm earning ₹960 crore of operating profit on ₹4,300 crore of capital employed returns 22.3%.

The reason to prefer it to return on equity is that 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 rather than the balance sheet structure. Two competitors with the same operations and different debt loads report the same figure here and very different returns on equity, which is exactly the behaviour you want from a measure of operating quality.

The 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. The comparison only means anything when both sides are computed the same way, so build the series yourself rather than collecting it from screeners.

State your definition once, then keep it.