Return on invested capital

Net operating profit after tax divided by invested capital. It is the sharpest single measure of business quality available from published accounts.

A company with ₹720 crore of net operating profit after tax on ₹3,600 crore of invested capital earns 20%.

What separates it from return on capital employed is discipline about what counts as invested. Invested capital is the money actually at work in operations: fixed assets plus working capital, or equivalently total funding minus surplus cash and non-operating investments. Excess cash earning treasury rates is not part of the operating business and leaving it in the denominator drags the return down for a reason that has nothing to do with how well the company runs.

Comparing this number to the weighted average cost of capital is the whole of value creation in one line. Above it, growth creates value. Below it, growth destroys value, and a company in that position growing quickly is destroying it faster.

Everything else in valuation is commentary on this comparison.