what is the purpose of ungearing the beta? confused.

Home Forums ACCA Forums F9 Financial Management Forums what is the purpose of ungearing the beta? confused.

This topic contains 1 reply, has 2 voices, and was last updated by avatar bridmw 4 years, 8 months ago.

Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts

  • avatar
    jrow
    Participant

    Hi,

    Can anybody explain the difference between the asset and equity betas and why we ungear the equity (???) beta?

    much appreciated.


    avatar
    bridmw
    Member

    We ungear the equity beta to see the risk that derives solely from the company’s business risk.

    Asset beta is the ungeared beta.
    Equity beta includes the gearing – it includes the financial and business risk.

Viewing 2 posts - 1 through 2 (of 2 total)

You must be logged in to reply to this topic.