Multivariate statistical methods as a tool of industry financial analysis: Evidence from Bosnia and Herzegovina construction industry.
There are over 50 financial ratios available for industry ratio analysis and some are more important than the others for different industries. Very often we have a situation that a performance seem to be excellent according to one ratio, but poor to another ratio. Therefore, we need to identify the smaller set of ratios to be used for industry financial analysis. The objective of this paper is to examine the use of multivariate statistical methods in financial ratios analysis in order to reduce the number of ratios and to select optimal ones as a base for construction of a synthetic general index. Empirical research covers BiH companies from the construction industry for the period from 2003 to 2012. The study shows that multivariate methods may be a useful tool for analysing the relation between financial ratios, as for reduction of the number of ratios required for assessing industry financial performance.