Explain Fully Why ROC = TSR

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The Answer is ROC (Return on Capital) and TSR (Total Shareholder Return) are related because they both measure the performance and profitability of a company.

ROC measures the return generated on the capital invested in a company, taking into account both debt and equity. It is calculated by dividing the company's net operating profit after taxes (NOPAT) by the total capital invested. This gives an indication of how efficiently the company is using its capital to generate profits.

TSR, on the other hand, measures the total return that shareholders have received from their investment in the company. It takes into account both stock price appreciation and dividends paid to shareholders. TSR provides a comprehensive view of the company's performance by considering both capital gains and income from dividends.

The relationship between ROC and TSR lies in the fact that a high ROC can lead to a high TSR. When a company is able to generate a high return on its capital, it is likely to be more profitable and therefore more attractive to investors. This can lead to an increase in the company's stock price, resulting in a higher TSR for shareholders.

In summary, ROC and TSR are related because a high ROC can contribute to a high TSR by indicating that the company is effectively using its capital to generate profits, which can attract investors and drive up the stock price.

Explain Fully Why ROC = TSR

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Explain Fully Why ROC = TSR

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