What Are the Appropriate Uses of the Sharpe and the Treynor

question 25

Essay

What are the appropriate uses of the Sharpe and the Treynor measures?

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Definitions:

ROCE

Return on Capital Employed; a measure of a company's profitability in relation to its capital, indicating how efficiently capital is being utilized to generate profits.

After Tax Cost

The net cost of an investment or financing option after taking into account the effects of taxes.

Financial Leverage

Applying borrowed resources to escalate the potential profits of an investment.

EPS

Earnings Per Share, a measure of a company's profitability that divides its net profit by the number of outstanding shares.