While some investors are already well versed in financial metrics (hat tip), this article is for those who would like to learn about Return On Equity (ROE) and why it is important. By way of learning-by-doing, we’ll look at ROE to gain a better understanding of Asian Hotels (North) Limited (NSE:ASIANHOTNR).

Return on equity or ROE is a key measure used to assess how efficiently a company’s management is utilizing the company’s capital. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company’s shareholders.

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How Is ROE Calculated?

Return on equity can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for Asian Hotels (North) is:

71% = ₹1.9b ÷ ₹2.6b (Based on the trailing twelve months to March 2025).

The ‘return’ is the amount earned after tax over the last twelve months. One way to conceptualize this is that for each ₹1 of shareholders’ capital it has, the company made ₹0.71 in profit.

See our latest analysis for Asian Hotels (North)

Does Asian Hotels (North) Have A Good Return On Equity?

One simple way to determine if a company has a good return on equity is to compare it to the average for its industry. However, this method is only useful as a rough check, because companies do differ quite a bit within the same industry classification. Pleasingly, Asian Hotels (North) has a superior ROE than the average (7.3%) in the Hospitality industry.

That is a good sign. With that said, a high ROE doesn’t always indicate high profitability. Especially when a firm uses high levels of debt to finance its debt which may boost its ROE but the high leverage puts the company at risk. You can see the 3 risks we have identified for Asian Hotels (North) by visiting our risks dashboard for free on our platform here.

How Does Debt Impact Return On Equity?

Virtually all companies need money to invest in the business, to grow profits. That cash can come from retained earnings, issuing new shares (equity), or debt. In the case of the first and second options, the ROE will reflect this use of cash, for growth. In the latter case, the debt used for growth will improve returns, but won’t affect the total equity. Thus the use of debt can improve ROE, albeit along with extra risk in the case of stormy weather, metaphorically speaking.

Combining Asian Hotels (North)’s Debt And Its 71% Return On Equity

Asian Hotels (North) does use a high amount of debt to increase returns. It has a debt to equity ratio of 2.10. Its ROE is pretty impressive but, it would have probably been lower without the use of debt. Debt does bring extra risk, so it’s only really worthwhile when a company generates some decent returns from it.

Conclusion

Return on equity is useful for comparing the quality of different businesses. In our books, the highest quality companies have high return on equity, despite low debt. All else being equal, a higher ROE is better.

Having said that, while ROE is a useful indicator of business quality, you’ll have to look at a whole range of factors to determine the right price to buy a stock. The rate at which profits are likely to grow, relative to the expectations of profit growth reflected in the current price, must be considered, too. You can see how the company has grow in the past by looking at this FREE detailed graph of past earnings, revenue and cash flow.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

PATTAYA, 5 August 2025: Royal Cliff Hotels Group announced this week that three of its hotels — Royal Cliff Beach Hotel, Royal Cliff Grand Hotel and Royal Wing Suites and Spa — have been recognised in Tripadvisor’s Travellers’ Choice Awards for 2025. 

Notably, Royal Wing Suites & Spa has achieved the distinction of being ranked at the top of the ranking among resorts in Pattaya, Thailand. Tripadvisor’s Travellers’ Choice Award winners are among the top 10% of listings around the world on Tripadvisor. Royal Cliff Hotels Group have consistently won these prestigious awards over the years. 

As the world’s largest travel guidance platform, Tripadvisor has unparalleled authority with travellers and diners. This award is based on genuine feedback from anyone in the community who has visited and left an authentic, first-hand review on Tripadvisor over 12 months, making it a valuable and trustworthy designation of travellers’ favourites. 

“We are truly honoured to receive the Tripadvisor Travellers’ Choice Awards for 2025 across three of our properties. This recognition is a testament to the dedication and passion of our entire team, who work tirelessly to deliver exceptional service and magical experiences to our guests. We are especially proud that the Royal Wing Suites and Spa has achieved the top ranking among the resorts in Pattaya. We would like to thank all our guests for their continued trust and glowing feedback, which inspires us to keep raising the bar in luxury hospitality.”, said Royal Cliff Hotels Group CEO Vitanart Vathanakul.

“Congratulations to Royal Cliff Beach Hotel, Royal Cliff Grand Hotel and Royal Wing Suites and Spa on their recognition in Tripadvisor’s Travellers’ Choice Awards for 2025,” said Tripadvisor President, Kristen Dalton.

“Ranking among the top percentage of businesses globally means you have made such a memorable impact on your visitors that many of them took time to go online and leave a glowing review about their experience. We hope this recognition continues to drive business to you in 2025 and beyond.” 

Check out all the reviews and discover more about Royal Cliff Hotels Group:

Perched atop a 64-acre private estate with breathtaking views of the Gulf of Thailand, the Royal Cliff Hotels Group boasts four luxury hotels. Travellers from all corners of the world can unlock a world of magical experiences with Royal Cliff’s curated promotions and packages at the ultimate luxury destination. Guests have access to a plethora of facilities, including seven swimming pools with one being the longest infinity edge pool in Thailand, a luxury sports club with tennis and squash courts, an award-winning health spa, multi-cuisine restaurants and a kids’ club.

For more information on the Royal Cliff Hotels Group, visit www.royalcliff.com.

Bengaluru: The commissioner of food safety and drug administration has directed all hotels and bakeries not to repeatedly reuse cooking oil and, instead, hand over the same to RUCO (Repurpose Used Cooking Oil) agencies to be converted into biodiesel or soap.The directive comes in the backdrop of a drop in collection of used cooking oil: the state is now receiving only around 1.5 lakh litres per month for conversion into biodiesel, compared to last year’s average monthly collection of 2.3 lakh litres. In the last four months, the two RUCO agencies (which have been registered by the Food Safety and Standards Authority of India) have received just over 6 lakh litres. With just weeks to go for the Ganesha festival, food department officials fear that used cooking oil, which is discarded by large users, end up finding their way into roadside hotels and snack-manufacturing units. Health minister Dinesh Gundu Rao said on Monday: “The oil supplied to RUCO agencies should have increased, but that’s not the case. We want food quality to be better to prevent trans fat in day-to-day meals.” The food department has also asked hotels to strictly give their used oil to RUCO agencies to prevent their reuse.Dushyant Patel, owner of Pyrene Industries, a central govt-enrolled RUCO agency for biodiesel manufacturing in Karnataka, observed that there has been a stagnation in used oil coming in over the past year. “All over India, there is an initiative to avoid the use of reused cooking oil — after a few uses in hotels, it goes down to the street vendor who buys it for a 30% discount. There’s a set limit of times oil can be used, but people are using it beyond that, and it is definitely getting back into the market — even into the manufacturing of new oil.“At a meeting that took place Monday, food safety commissioner Srinivas K instructed all cooking oil manufacturing unit owners to maintain hygiene and sell fortified cooking oil to the public. GK Shetty, president of Karnataka State Hotels’ Association, said the association has reminded hoteliers from time to time to keep their bills and give their used oil to FSSAI-registered agencies. “A Dharshini (quick-service restaurant) would use 5-15 litres of oil a day. While the buying cost of fresh oil is Rs 125-140 a litre, when we sell it to RUCO agencies, we receive Rs 65-75 a litre,” he said, adding that there are some hotels that end up reusing oil as a matter of survival.Srinivas said reused oil collection usually increases during the festive season, which is due in the months to come.