Pure play
From Wikipedia, the free encyclopedia
In financial management, a pure play is a company whose shares are publicly traded and that either has, or is very close to having, a single business focus.[1] Coca-Cola is an example of a pure play in this context because it retails only beverages. On the other hand, Pepsi is not a pure play because it also owns the Frito-Lay snack foods brand.[citation needed]
The pure play approach or pure play method is a method for estimating the cost of capital for a proposed new project or product line. It involves examining other companies which are pure plays in the proposed line of business and infering a cost of capital based on their capital structures (eg Debt-to-Equity ratio) and betas.[2]
[edit] References
- ^ Robert A. McLean (2003). "Special Topics on Capital Budegeting", Financial Management in Health Care Organizations. Thomson Delmar Learning, 221. ISBN 0766835472.
- ^ Eugene Foster Brigham and Louis C. Gapenski (1985). Financial Management: Theory and Practice. Dryden Press, 486. ISBN 0030980666.
[edit] Further reading
- Cleveland S. Patterson. "Esitmating for non-traded assets", The Cost of Capital: Theory and Estimation. Quorum/Greenwood, 221–224. ISBN 0899308627.
- John Frederick Weston and Eugene F. Brigham (1974). "The Pure Play Method", Essentials of managerial finance. Dryden Press, 623–624. ISBN 0030307333.
- N.R. Parasuraman (November 2002). "Ascertaining the divisional Beta for project evaluation — the Pure Play Method — a discussion" (PDF). The Chartered Accountant 31 (5): 546–549.
- Collier, HW; Grai, T; Haslitt, S; and McGowan, CB (October 2006). "Computing the divisional cost of capital using the pure play method" (PDF). Applied Financial Economics Journal.
- Larry A. Cox and Gary L. Griepentrog (September 1988). "The Pure-Play Cost of Equity for Insurance Divisions". The Journal of Risk and Insurance 55 (3): 442–452. DOI:10.2307/253253.
