APPLYING FACTOR ANALYSIS ON THE FINANCIAL RATIOS OF TURKEY’S TOP 500 INDUSTRIAL ENTERPRISES

Abstract

Factor analysis is a method that is used to reduce several variables into fewer dimensions that are called factors. As a data reduction technique, it condenses the variables into weighted linear combinations of the variables. This study conducts factor analysis on the financial ratios of the top 500 industrial enterprises in Turkey for 2010. The purpose of the study is to group the financial ratios into categories and eliminate redundancy among them. Our results provide partial support for the textbook classification of financial ratios.