• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

Congratulations to Jamil from Pakistan and Jeeva from Malaysia - Global Prize winners!
see all ACCA December 2022 Genius Hunt Competition winners >>

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

Beta calculation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Beta calculation

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • April 6, 2021 at 2:30 pm #616099
    HamzaYusuf
    Member
    • Topics: 38
    • Replies: 19
    • ☆☆

    I have two questions that are confusing me from a long time! Somebody, please help me with this!

    1) If a similar company has Beta which is entirely ungeared Beta [meaning no debt], then do we have to calculate firstly ASSET Beta for our company or we can ungear Beta of the similar company directly to calculate EQUITY Beta for our company [meaning we don’t have to calculate Asset Beta since the similar company has no [debt] & there is no point to ungear it?

    In other words, If Beta of similar company is ungeared, so can we directly use this to calculate EQUITY Beta without calculating Asset Beta because it is already ungeared?

    2) If Beta of similar company is geared [meaning it has both debt & equity raised finance], then we have to ungear the geared BETA of similar company to use it for our geared company Beta calculation? [right?]

    April 6, 2021 at 2:43 pm #616101
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51571
    • ☆☆☆☆☆

    The only reason that the equity beta is different from the asset beta is because of gearing in the company – more gearing make the shares more risky and therefore the equity beta will be higher.
    If there is no gearing then the equity beta is equal to the asset beta.

    To get the equity beta for our company, we find a company in the same business – the two companies will have the same asset beta. If the similar company is geared the we need to use the formula to calculate the asset beta from the equity beta, using the gearing of the similar company. If the similar company is not geared, then the asset beta is equal to the equity beta of the similar company.

    When we know the asset beta of the similar company and therefore the asset beta of our company, then if our company is geared we need to use the formula to calculate the equity beta for our company (using the gearing of our company). If our company has no gearing, then the equity beta for our company will be equal to the asset beta that we found from the similar company.

    All of this is explained (with examples) in my free lectures. The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • Amalsudheesh on FA Chapter 6 Questions Depreciation
  • roshpatel on PM Chapter 7 Questions Pricing
  • John Moffat on Inventory Control (part 2) Quantity Discounts – ACCA Management Accounting (MA)
  • John Moffat on FA Chapter 6 Questions Depreciation
  • SimplyDammy on Inventory Control (part 2) Quantity Discounts – ACCA Management Accounting (MA)

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy