Asked by Morgan Beasley on Jun 07, 2024
Verified
When a similar company can't be found to use in estimating a divisional beta, the division's own records can sometimes be used instead. This method is called:
A) pure play.
B) CAPM.
C) accounting beta.
D) financial accounting.
Pure Play
Refers to a company that focuses on a specific industry segment, offering a narrow and specialized range of products or services.
Divisional Beta
A measurement of the risk associated with a particular division of a company, relative to the overall market.
Accounting Beta
A measure of the sensitivity of a company's operating income to changes in the economy or its sector, used for risk assessment in strategic planning.
- Understand the significance of portfolio theory and various risk mitigation techniques in capital allocation.
Verified Answer
LD
Laura DominguezJun 14, 2024
Final Answer :
C
Explanation :
This method is called accounting beta, which uses a division's own financial records to estimate its beta when there are no comparable companies available for comparison.
Learning Objectives
- Understand the significance of portfolio theory and various risk mitigation techniques in capital allocation.