Return on Equity, Return on networth -Stocks

Return on equity -Net profit ( net earnings)*100/Total outstanding equity
This gives the return from a shareholder's perspective and does not reflect how well the accumulted shareholder's money ( reflected in Reserves and surplus ) is utilised.

Better parameter would be Return on networth

This is Net profit after taxes *100/ Networth of the company constituting Equity and reserves & surplus.

This again does not reflect how well the total funds of the company( including borrowed funds are deployed. For that one has to take int o consideration the net ptofit before interest /total capital deployed
More in the next

Current ratio - Importance in Financial evaluation specifc reference to the Indian context

Current ratio which is nothing but current assets /current liabilities is quite a critical part of the overall financial evaluation. This is one of the critical parameters not only in evaluating the efficient use of resources but also is a test of the credibility of the financials. In quite a few Companies, one finds that most of the net profit for the year sits in the form of an Inventory or Debtors. This could be a clear indication that eithet the stocks are overvalued or the receivables may not be fully receivable. While this may not be true in all the cases, quite a few of the Indian companies have thgis problem. They keep reporting profits year after year , but you will see the burgeoning size of the Debtors and Inventory. Operational cashflow over the years is negative.
Clearsign that one should avoid such shares. There can be the odd Comapny where there could be geneuine reasons.But in general such Companies should be