I´m trying to calculate the beta of a company that has high operating leverage . If I create a proxy for measuring the operating leverage, how can I make the proper adjustments to it´s final beta?
Stacey Warren - Expert brainly.com
Hey! We 've verified this expert answer for you, click below to unlock the details :)
At vero eos et accusamus et iusto odio dignissimos ducimus qui blanditiis praesentium voluptatum deleniti atque corrupti quos dolores et quas molestias excepturi sint occaecati cupiditate non provident, similique sunt in culpa qui officia deserunt mollitia animi, id est laborum et dolorum fuga.
Et harum quidem rerum facilis est et expedita distinctio. Nam libero tempore, cum soluta nobis est eligendi optio cumque nihil impedit quo minus id quod maxime placeat facere possimus, omnis voluptas assumenda est, omnis dolor repellendus.
Itaque earum rerum hic tenetur a sapiente delectus, ut aut reiciendis voluptatibus maiores alias consequatur aut perferendis doloribus asperiores repellat.
I got my questions answered at brainly.com in under 10 minutes. Go to brainly.com now for free help!
Can't you try to adjust it by using the company's P/E ratios and its share price performance? I think that is a better proxy, since those indicators tell you the risk profie of that company.
You can use the unlevered beta, which takes leverage into consideration.
I agree with eversuhoshin, but the unleveraged beta has to be corrected for cash.
Not the answer you are looking for? Search for more explanations.
The problem with unlevered beta is that it deals with financial leverage not specifically operational leverage. If the operational leverage is linked with promised payments, then only can unlevered beta be used because promised payments become a liability (short term debt).
Your best bet for now is to calculate operational leverage (% change in EBIT / % change in Sales).