Which statement about levered beta is true?

Levered beta is a measure that reflects the volatility of a company’s stock relative to the market, taking into account both the business risks associated with the firm's assets and the financial risks stemming from its capital structure, particularly its use of debt. When a company is levered, it means that it is financing its operations using a mix of debt and equity, which adds an additional layer of risk due to the obligation to meet debt repayments.

This inclusion of financial risk is what distinguishes levered beta from unlevered beta, which only captures the inherent risks of the company’s operations without the effects of debt. High levels of debt can amplify the movements in stock price, leading to a higher levered beta compared to an unlevered beta. Therefore, the accurate depiction of levered beta incorporates both types of risks, making the statement that it includes both business risk and financial risk true.

The other statements lack correctness because they either mischaracterize the nature of levered beta or its relevance in assessing company performance. For instance, levered beta can exceed unlevered beta when a company has significant debt, and it is directly pertinent to evaluating the overall risk of an investment in the company.