Operating Leverage and Financial Structure
Interactive

Operating Leverage and Financial Structure

Intuition Publishing
Updated Sep 23, 2020

Beta is a measure of the volatility of a stock relative to market volatility. It is normally calculated by regressing returns on a stock against returns on a market index. Beta is a vital component in the cost of equity calculation and is influenced by a number of factors. Here we look at the calculation of beta and how the nature of a company, its operating leverage, and capital structure all affect beta.