This document explains Multivariate Analysis techniques Regression and Factor Analysis with hands on example.

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This document explains Multivariate Analysis techniques Regression and Factor Analysis with hands on example.

Attribution Non-Commercial (BY-NC)

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MRA&FA

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PROJECT ON

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MRA AND FACTOR

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ANALYSIS

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Assignment #2

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9/11/2010

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Birendra Singh 341

MBA CoreII Yr

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MRA&FA 2010

DATA DESCRIPTION

Data File is Share.Sav

The data included the various variables governing the Share Price of the equity. The various Variables

data has been taken from the net Randomly for various stocks of the Companies. The variables EPS, P/E,

Operating Profit Margin, Net Profit Margin, Dividend/Share(Rs), Return On Net Worth and Current Ratio

are the variables under Research to find out a relationship between the Share Price of the Stock and the

independent variables. The variables are important parameters in order to judge the performance of the

company and are a good indicator of the overall profile and valuation of the Company.

The data is taken for 30 Companies and subsequently the research is done on the data. The sample size is

30 which comprises of the Companies ranging from the small Cap to large Cap. The file name is

Share.xls.

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MRA&FA 2010

NPar Tests

EPS(Rs/yr) P/E Current Ratio

N 33 33 33

a,,b

Normal Parameters Mean 28.2309 28.4991 2.271818

Std. Deviation 32.58242 22.95019 1.9324053

Most Extreme Differences Absolute .213 .201 .167

Positive .209 .201 .167

Negative -.213 -.168 -.153

Kolmogorov-Smirnov 1.222 1.155 .957

Z

Asymp. Sig. (2-tailed) .101 .139 .319

a. Test distribution is Normal.

b. Calculated from data.

DebttoEquity Assets Operating

ratio TurnOver Ratio Profit Margin

N 33 33 33

Normal Parametersa,,b Mean 1.596667 17.1227 .275842

Std. Deviation 2.5634836 55.64674 .2088116

Most Extreme Differences Absolute .278 .386 .184

Positive .278 .386 .184

Negative -.267 -.380 -.113

Kolmogorov-Smirnov 1.597 2.217 1.057

Z

Asymp. Sig. (2-tailed) .012 .000 .213

a. Test distribution is Normal.

b. Calculated from data.

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MRA&FA 2010

Net Profit Dividend/Share Return On Net

Margin (Rs) Worth

N 33 33 33

Normal Parametersa,,b Mean .164561 6.81939 .195124

Std. Deviation .1069685 7.364977 .1011862

Most Extreme Differences Absolute .086 .177 .104

Positive .086 .173 .104

Negative -.066 -.177 -.056

Kolmogorov-Smirnov .494 1.018 .600

Z

Asymp. Sig. (2-tailed) .968 .251 .865

a. Test distribution is Normal.

b. Calculated from data.

EBDIT(RsCr) Price(Rs)

N 33 33

a,,b

Normal Parameters Mean 4490.848788 618.4090909

Std. Deviation 1.1184828E4 6.75112740E2

Most Extreme Differences Absolute .346 .234

Positive .303 .234

Negative -.346 -.193

Kolmogorov-Smirnov 1.988 1.346

Z

Asymp. Sig. (2-tailed) .001 .053

a. Test distribution is Normal.

b. Calculated from data.

RESULT INTERPRETATION:

We see from the output that all of the variables (except EBDIT, Debt/eqty ratio and ATR) are

normally distributed as the two tailed level of significance is high enough (alpha=0.05) to accept

the null hypothesis. So the data of all the variables (except EBDIT, Debt/eqty ratio and ATR)

follow a normal distribution approx. That means that all of the variables (except EBDIT,

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MRA&FA 2010

Debt/eqty ratio and ATR) can be tested for ANOVA and can be applied to Regression Model.

This has tested our first assumption for linear regression.

This implies we need to find a MRA model of Price of a Share with the given independent

variables (except EBDIT, Debt/eqty ratio and ATR).

So the Assumption of normality of independent as well as dependent variables from KS test is

valid for the independent and dependent variables as Price, EPS, P/E, Operating Profit Margin,

Net Profit Margin, Dividend/Share(Rs), Return On Net Worth and Current Ratio.

In next step Run Linear Regression for the above variables with Price as dependent variables and

rest as the independent variables.

Descriptive Statistics

Mean Std. Deviation N

Price(Rs) 618.4090909 6.75112740E2 33

EPS(Rs/yr) 28.2309 32.58242 33

P/E 28.4991 22.95019 33

Current Ratio 2.271818 1.9324053 33

Operating Profit Margin .275842 .2088116 33

Net Profit Margin .164561 .1069685 33

Dividend/Share(Rs) 6.81939 7.364977 33

Return On Net Worth .195124 .1011862 33

Correlations

Price(Rs) EPS(Rs/yr) P/E Current Ratio

Pearson Correlation Price(Rs) 1.000 .851 .079 -.173

EPS(Rs/yr) .851 1.000 -.219 -.302

P/E .079 -.219 1.000 .544

Current Ratio -.173 -.302 .544 1.000

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MRA&FA 2010

Net Profit Margin .006 -.043 -.035 .010

Dividend/Share(Rs) .860 .783 -.011 -.149

Return On Net Worth .268 .267 -.319 -.458

Sig. (1-tailed) Price(Rs) . .000 .331 .168

EPS(Rs/yr) .000 . .111 .044

P/E .331 .111 . .001

Current Ratio .168 .044 .001 .

Operating Profit Margin .248 .215 .051 .003

Net Profit Margin .487 .406 .424 .479

Dividend/Share(Rs) .000 .000 .476 .204

Return On Net Worth .066 .067 .035 .004

N Price(Rs) 33 33 33 33

EPS(Rs/yr) 33 33 33 33

P/E 33 33 33 33

Current Ratio 33 33 33 33

Operating Profit Margin 33 33 33 33

Net Profit Margin 33 33 33 33

Dividend/Share(Rs) 33 33 33 33

Return On Net Worth 33 33 33 33

Correlations

Operating Net Profit Dividend/Share

Profit Margin Margin (Rs)

Pearson Correlation Price(Rs) -.123 .006 .860

EPS(Rs/yr) -.142 -.043 .783

P/E .290 -.035 -.011

Current Ratio .466 .010 -.149

Operating Profit Margin 1.000 .641 -.102

Net Profit Margin .641 1.000 -.007

Dividend/Share(Rs) -.102 -.007 1.000

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MRA&FA 2010

Sig. (1-tailed) Price(Rs) .248 .487 .000

EPS(Rs/yr) .215 .406 .000

P/E .051 .424 .476

Current Ratio .003 .479 .204

Operating Profit Margin . .000 .286

Net Profit Margin .000 . .485

Dividend/Share(Rs) .286 .485 .

Return On Net Worth .421 .073 .006

N Price(Rs) 33 33 33

EPS(Rs/yr) 33 33 33

P/E 33 33 33

Current Ratio 33 33 33

Operating Profit Margin 33 33 33

Net Profit Margin 33 33 33

Dividend/Share(Rs) 33 33 33

Return On Net Worth 33 33 33

Correlations

Return On Net

Worth

Pearson Correlation Price(Rs) .268

EPS(Rs/yr) .267

P/E -.319

Current Ratio -.458

Operating Profit Margin -.036

Net Profit Margin .259

Dividend/Share(Rs) .429

Return On Net Worth 1.000

Sig. (1-tailed) Price(Rs) .066

EPS(Rs/yr) .067

P/E .035

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MRA&FA 2010

Operating Profit Margin .421

Net Profit Margin .073

Dividend/Share(Rs) .006

Return On Net Worth .

N Price(Rs) 33

EPS(Rs/yr) 33

P/E 33

Current Ratio 33

Operating Profit Margin 33

Net Profit Margin 33

Dividend/Share(Rs) 33

Return On Net Worth 33

RESULT INTERPRETATION:

Above Part and Partial Coorelations matrix is helpful in understanding the relationship between

independent and dependent variables. If the independent and dependent variables are highly interrelated

then this is refer to as Multicollinearity. The Regression Equation is valid only if there is no high

Multicollinearity. The above table found variables relationship among all the variables with each other.

The Pearson Correlation Coefficient is less than 0.80 between all the dependent variables taken two at a

time. So there appears no problem of multicollinearity to affect the regression model. All the dependent

variable have a Pearson Correlation of less than 0.7 except the EPS & Dividend per share correlation

which is .783. Also there are no very high correlations of more than .9, which might have made our entire

regression analysis unreliable for interpreting the regression coefficients.

Variables Entered/Removed

Variables Variables

Model Entered Removed Method

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MRA&FA 2010

Worth,

Operating

Profit Margin,

EPS(Rs/yr),

P/E, Current

Ratio, Net

Profit Margin,

Dividend/Share

(Rs)a

a. All requested variables entered.

The Above table shows that the method selected was Enter method without conveying any significant

meaning.

Model Summaryb

Model R R Square Square the Estimate

1 .936a .877 .842 2.68245955E2

a. Predictors: (Constant), Return On Net Worth, Operating Profit

Margin, EPS(Rs/yr), P/E, Current Ratio, Net Profit Margin,

Dividend/Share(Rs)

b. Dependent Variable: Price(Rs)

RESULT INTERPRETATION:

The coefficient of multiple determination is .877 which is high,

therefore 87.7% of the variation in the share Price(dependent

variable) is explained by the seven independent variables Return

On Net Worth, Operating Profit Margin, EPS (Rs/yr), P/E,

Current Ratio, Net Profit Margin, Dividend/Share (Rs). The

regression model would be significant to make predictions since

the value of R2 is close to 1.

Model Summaryb

Model Change Statistics

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MRA&FA 2010

R Square

Change F Change df1 df2 Sig. F Change Durbin-Watson

1 .877 25.385 7 25 .000 1.856

RESULT INTERPRETATION:

The Durbin-Watson coefficient is 1.856 is between the acceptable range of 1.5-2.5. So there is no

problem of autocollinearity of the independent variables. Error terms of any two variables are not

correlated with one another i.e. the correlation between any two of them is zero. Thus this assumption

that there is no serial correlation among residual terms is valid.

ANOVAb

Model Sum of Squares df Mean Square F Sig.

1 Regression 1.279E7 7 1826567.635 25.385 .000a

Residual 1798897.313 25 71955.893

Total 1.458E7 32

a. Predictors: (Constant), Return On Net Worth, Operating Profit Margin, EPS(Rs/yr),

P/E, Current Ratio, Net Profit Margin, Dividend/Share(Rs)

b. Dependent Variable: Price(Rs)

RESULT INTERPRETATION:

The Anova table indicates whether the model is significant or not. From above Anova test at .05 level of

significance we see that Sig value=.00<00.05(level of significance), So there exists enough evidence to

conclude that the independent variables are useful or significant in predicting the Price of a

share(dependent variable). Therefore the Regression model is significant.

Coefficients a

Standardized

Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) -152.891 187.232 -.817 .422

EPS(Rs/yr) 11.945 2.730 .576 4.376 .000

P/E 7.797 2.640 .265 2.954 .007

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MRA&FA 2010

Operating Profit Margin -561.439 380.864 -.174 -1.474 .153

Net Profit Margin 1024.625 659.232 .162 1.554 .133

Dividend/Share(Rs) 37.149 12.822 .405 2.897 .008

Return On Net Worth -211.518 660.668 -.032 -.320 .752

a. Dependent Variable: Price(Rs)

RESULT INTERPRETATION:

The table gives the regression coefficients for each of the variables and their significance. The regression

equation can be framed as:

Price= -152.891+11.945*EPS+7.797*P/E-6.138*CurrentRatio-

561.439*OperatingprofitMargin+1024.625*NetProfitMargin+37.149*Dividend/Share-211.518*Return on

Net Worth.

The above Equation indicates that:

i) Average Price per share increases by 11.945Rs for every 1 Rs increase in EPS of a share

when all other variables are held constant.

ii) Average Price per share increases by 7.797Rs for every 1 unit increase in P/E ratio of a share

when all other variables are held constant.

iii) Average Price per share decreases by 6.138Rs for every 1 unit increase in Current Ratio of a

Company when all other variables are held constant.

iv) Average Price per share decreases by 5.61439Rs for every 1% increase in Operating profit

Margin of a Company when all other variables are held constant.

v) Average Price per share increases by 10.24625Rs for every 1% increase in Net profit Margin

of a Company when all other variables are held constant.

vi) Average Price per share increases by 37.149Rs for every 1Rs increase in Dividend/Share of a

Company when all other variables are held constant.

vii) Average Price per share decreases by 2.11518 Rs for every 1% increase in Return on Net

Worth of a Company when all other variables are held constant.

Coefficients a

95.0% Confidence Interval for

B Correlations

Model Lower Bound Upper Bound Zero-order Partial Part

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MRA&FA 2010

EPS(Rs/yr) 6.323 17.567 .851 .659 .307

P/E 2.360 13.234 .079 .509 .207

Current Ratio -84.150 71.873 -.173 -.032 -.011

Operating Profit Margin -1345.842 222.964 -.123 -.283 -.104

Net Profit Margin -333.089 2382.340 .006 .297 .109

Dividend/Share(Rs) 10.741 63.557 .860 .501 .203

Return On Net Worth -1572.190 1149.153 .268 -.064 -.022

a. Dependent Variable: Price(Rs)

RESULT INTERPRETATION:

From above table we infer that

i) We are 95% Confident that for every single Re increase of EPS the Average price per

Share increases between the interval 6.323-17.567 Rs.

ii) We are 95% Confident that for every single unit increase of P/E the Average price per

Share increases between the interval 2.360-13.234 Rs.

iii) We are 95% Confident that for every single unit increase of Current Ratio the Average

price per Share decreases/increases between the interval -84.150-71.873 Rs

iv) We are 95% Confident that for every single percent increase of Operating Profit Margin

the Average price per Share decreases/increases between the interval -13.45842-2.22964

Rs

v) We are 95% Confident that for every single percent increase of Net Profit Margin the

Average price per Share decreases/increases between the interval -3.33089-23.8234 Rs.

vi) We are 95% Confident that for every single Re increase of Dividend Per Share the

Average price per Share increases between the interval 10.741-63.557 Rs

vii) We are 95% Confident that for every single percent increase of Return on Net Worth the

Average price per Share decreases/increases between the interval -15.72190-11.49153 Rs.

Coefficients a

Collinearity Statistics

Model Tolerance VIF

1 EPS(Rs/yr) .284 3.518

P/E .613 1.632

Current Ratio .420 2.383

Operating Profit Margin .356 2.813

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MRA&FA 2010

Dividend/Share(Rs) .252 3.966

Return On Net Worth .503 1.987

a. Dependent Variable: Price(Rs)

RESULT INTERPRETATION:

Since none of the predictor variables has a variance inflation factor (VIF) greater than five (all VIFs are

Are less than 5 or Tolerance>0.20), there are no apparent multicollinearity problems; in other words, there

is no variable in the model that is measuring the same relationship/quantity as is measured by another

variable or group of variables.

Collinearity Diagnosticsa

Variance Proportions

Dimen Condition

Model sion Eigenvalue Index (Constant) EPS(Rs/yr) P/E Current Ratio

1 1 5.732 1.000 .00 .00 .00 .00

2 1.116 2.266 .00 .05 .02 .03

3 .494 3.406 .00 .01 .11 .06

4 .256 4.728 .03 .08 .11 .03

5 .167 5.859 .04 .00 .54 .37

6 .127 6.730 .09 .39 .05 .05

7 .076 8.691 .01 .01 .00 .08

8 .032 13.293 .84 .46 .16 .38

a. Dependent Variable: Price(Rs)

Collinearity Diagnosticsa

Variance Proportions

Dimen Operating Net Profit Dividend/Share Return On Net

Model sion Profit Margin Margin (Rs) Worth

1 1 .00 .00 .00 .00

2 .01 .00 .03 .00

3 .02 .08 .02 .03

4 .12 .02 .00 .12

5 .02 .05 .01 .03

6 .01 .00 .43 .04

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MRA&FA 2010

8 .18 .10 .47 .62

a. Dependent Variable: Price(Rs)

Residuals Statisticsa

Minimum Maximum Mean Std. Deviation N

Predicted Value -26.8449707 2.7984128 618.4090909 6.32108907E2 33

E3

Residual - 7.4374310 .00000000 2.37098167E2 33

3.60662933E2 3E2

Std. Predicted Value -1.021 3.449 .000 1.000 33

Std. Residual -1.345 2.773 .000 .884 33

a. Dependent Variable: Price(Rs)

RESULT INTERPRETATION:

The mean of the Standardized Residuals is Zero.

Charts

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RESULT INTERPRETATION:

From Above graphs it is clear that the points are close to the linear diagonal line with no substantial or

systematic departures and thus the standardized residuals are approximately normally distributed. So this

satisfies the assumption of Normal Distribution of residuals with conditional mean zero and

variance. So our another assumption for MRA is found to be true and Our Share Price Regression

Model is valid.

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MRA&FA 2010

RESULT INTERPRETATION:

The plot of residual against the all the Standardized values of Predictor variable is somewhat showing the

constancy of residuals across all the set of Predicted values. This plot of Residuals against the predicted

dependent values is not showing any particular pattern, so the all the Residual terms are independent of

each of the standardized Predicted values. This validates the assumption of Homoscedasticity. So our

Regression Model is valid.

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RESULT INTERPRETATION:

The Price is showing linear relationship in majority of the cases with the independent variables. So

our assumption of linearity is also verifies and the Regression model is valid.

MODEL1:

Price= -152.891+11.945*EPS+7.797*P/E-6.138*CurrentRatio-

561.439*OperatingprofitMargin+1024.625*NetProfitMargin+37.149*Dividend/Share-

211.518*Return on Net Worth.

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MRA&FA 2010

Descriptive Statistics

Mean Std. Deviation N

Price(Rs) 618.4090909 6.75112740E2 33

EPS(Rs/yr) 28.2309 32.58242 33

P/E 28.4991 22.95019 33

Current Ratio 2.271818 1.9324053 33

Operating Profit Margin .275842 .2088116 33

Net Profit Margin .164561 .1069685 33

Dividend/Share(Rs) 6.81939 7.364977 33

Return On Net Worth .195124 .1011862 33

Correlations

Price(Rs) EPS(Rs/yr) P/E Current Ratio

Pearson Correlation Price(Rs) 1.000 .851 .079 -.173

EPS(Rs/yr) .851 1.000 -.219 -.302

P/E .079 -.219 1.000 .544

Current Ratio -.173 -.302 .544 1.000

Operating Profit Margin -.123 -.142 .290 .466

Net Profit Margin .006 -.043 -.035 .010

Dividend/Share(Rs) .860 .783 -.011 -.149

Return On Net Worth .268 .267 -.319 -.458

Sig. (1-tailed) Price(Rs) . .000 .331 .168

EPS(Rs/yr) .000 . .111 .044

P/E .331 .111 . .001

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MRA&FA 2010

Operating Profit Margin .248 .215 .051 .003

Net Profit Margin .487 .406 .424 .479

Dividend/Share(Rs) .000 .000 .476 .204

Return On Net Worth .066 .067 .035 .004

N Price(Rs) 33 33 33 33

EPS(Rs/yr) 33 33 33 33

P/E 33 33 33 33

Current Ratio 33 33 33 33

Operating Profit Margin 33 33 33 33

Net Profit Margin 33 33 33 33

Dividend/Share(Rs) 33 33 33 33

Return On Net Worth 33 33 33 33

Correlations

Operating Net Profit Dividend/Share

Profit Margin Margin (Rs)

Pearson Correlation Price(Rs) -.123 .006 .860

EPS(Rs/yr) -.142 -.043 .783

P/E .290 -.035 -.011

Current Ratio .466 .010 -.149

Operating Profit Margin 1.000 .641 -.102

Net Profit Margin .641 1.000 -.007

Dividend/Share(Rs) -.102 -.007 1.000

Return On Net Worth -.036 .259 .429

Sig. (1-tailed) Price(Rs) .248 .487 .000

EPS(Rs/yr) .215 .406 .000

P/E .051 .424 .476

Current Ratio .003 .479 .204

Operating Profit Margin . .000 .286

Net Profit Margin .000 . .485

Dividend/Share(Rs) .286 .485 .

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MRA&FA 2010

N Price(Rs) 33 33 33

EPS(Rs/yr) 33 33 33

P/E 33 33 33

Current Ratio 33 33 33

Operating Profit Margin 33 33 33

Net Profit Margin 33 33 33

Dividend/Share(Rs) 33 33 33

Return On Net Worth 33 33 33

Correlations

Return On Net

Worth

Pearson Correlation Price(Rs) .268

EPS(Rs/yr) .267

P/E -.319

Current Ratio -.458

Operating Profit Margin -.036

Net Profit Margin .259

Dividend/Share(Rs) .429

Return On Net Worth 1.000

Sig. (1-tailed) Price(Rs) .066

EPS(Rs/yr) .067

P/E .035

Current Ratio .004

Operating Profit Margin .421

Net Profit Margin .073

Dividend/Share(Rs) .006

Return On Net Worth .

N Price(Rs) 33

EPS(Rs/yr) 33

P/E 33

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Current Ratio 33

Operating Profit Margin 33

Net Profit Margin 33

Dividend/Share(Rs) 33

Return On Net Worth 33

RESULT INTERPRETATION:

The above table found variables relationship among all the variables with each other. The Pearson

Correlation Coefficient is less than 0.80 between all the dependent variables taken two at a time. So there

appears no problem of multicollinearity to affect the regression model. All the dependent variable have a

Pearson Correlation of less than 0.7 except the EPS/Dividend per share correlation which is .783.

Variables Entered/Removeda

Variables Variables

Model Entered Removed Method

1 Dividend/Share . Stepwise

(Rs) (Criteria:

Probability-of-

F-to-enter <=

.050,

Probability-of-

F-to-remove >=

.100).

2 EPS(Rs/yr) . Stepwise

(Criteria:

Probability-of-

F-to-enter <=

.050,

Probability-of-

F-to-remove >=

.100).

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3 P/E . Stepwise

(Criteria:

Probability-of-

F-to-enter <=

.050,

Probability-of-

F-to-remove >=

.100).

a. Dependent Variable: Price(Rs)

Method of entering the variables is stepwise.

Model Summaryd

Model R R Square Square the Estimate

1 .860a .739 .731 3.50422262E2

2 .906b .820 .808 2.95576431E2

c

3 .927 .859 .844 2.66399216E2

a. Predictors: (Constant), Dividend/Share(Rs)

b. Predictors: (Constant), Dividend/Share(Rs), EPS(Rs/yr)

c. Predictors: (Constant), Dividend/Share(Rs), EPS(Rs/yr), P/E

d. Dependent Variable: Price(Rs)

RESULT INTERPRETATION:

It’s a stepwise method will give all the regression models that

are significant at each step. The last model is generally the best

model with highest adjusted R2. .So, We accept the last model as

it has the highest value of coefficient of multiple determination

R2 and is a better estimate.

The coefficient of multiple determination is .859, therefore

85.9% of the variation in the share Price is explained by the

independent variables EPS (Rs/yr), P/E, Dividend/Share (Rs).

The regression model would be significant to make predictions

since the value of R2 is close to 1.

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Model Summaryd

Change Statistics

R Square

Model Change F Change df1 df2 Sig. F Change Durbin-Watson

1 .739 87.773 1 31 .000

2 .081 13.572 1 30 .001

3 .039 7.931 1 29 .009 1.737

RESULT INTERPRETATION:

The Durbin-Watson coefficient is 1.737 is between the acceptable range of 1.5-2.5. So there is no

problem of autocollinearity of the independent variables. Error terms of any two variables are not

correlated with one another i.e. the correlation between any two of them is zero. Thus this assumption that

there is no serial correlation among residual terms is valid.

ANOVAd

Model Sum of Squares df Mean Square F Sig.

1 Regression 1.078E7 1 1.078E7 87.773 .000a

Residual 3806668.619 31 122795.762

Total 1.458E7 32

2 Regression 1.196E7 2 5981953.978 68.470 .000b

Residual 2620962.801 30 87365.427

Total 1.458E7 32

3 Regression 1.253E7 3 4175594.342 58.837 .000c

Residual 2058087.731 29 70968.542

Total 1.458E7 32

a. Predictors: (Constant), Dividend/Share(Rs)

b. Predictors: (Constant), Dividend/Share(Rs), EPS(Rs/yr)

c. Predictors: (Constant), Dividend/Share(Rs), EPS(Rs/yr), P/E

d. Dependent Variable: Price(Rs)

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MRA&FA 2010

RESULT INTERPRETATION:

From above Anova test at .05 level of significance and significance<.05 there exists enough evidence to

conclude that the variables are useful are significant in predicting the Price of a share. Therefore the

Regression model is useful.

Coefficients a

Standardized

Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 81.040 83.732 .968 .341

Dividend/Share(Rs) 78.800 8.411 .860 9.369 .000

2 (Constant) 37.355 71.615 .522 .606

Dividend/Share(Rs) 45.851 11.416 .500 4.016 .000

EPS(Rs/yr) 9.506 2.580 .459 3.684 .001

3 (Constant) -149.873 92.660 -1.617 .117

Dividend/Share(Rs) 37.917 10.668 .414 3.554 .001

EPS(Rs/yr) 11.857 2.471 .572 4.798 .000

P/E 6.140 2.180 .209 2.816 .009

a. Dependent Variable: Price(Rs)

RESULT INTERPRETATION:

We accepted the third model.

The table gives the regression coefficients for each of the variables and their significance. The

regression equation can be framed as:

Price=

-149.873+37.917*Dividend/Share+11.857*EPS+6.14*P/E

The above Equation indicates that:

i) Average Price per share increases by 37.917Rs for every 1 Rs increase in

Dividend/Share of a share when all other variables are held constant.

ii) Average Price per share increases by 11.857Rs for every 1 Rs increase in EPS of a

share when all other variables are held constant.

iii) Average Price per share increases by 6.14Rs for every 1 unit increase in P/E of a

share when all other variables are held constant

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Coefficients a

95.0% Confidence Interval for

B Correlations

Model Lower Bound Upper Bound Zero-order Partial Part

1 (Constant) -89.732 251.812

Dividend/Share(Rs) 61.646 95.954 .860 .860 .860

2 (Constant) -108.902 183.613

Dividend/Share(Rs) 22.537 69.166 .860 .591 .311

EPS(Rs/yr) 4.236 14.776 .851 .558 .285

3 (Constant) -339.385 39.638

Dividend/Share(Rs) 16.099 59.735 .860 .551 .248

EPS(Rs/yr) 6.803 16.910 .851 .665 .335

P/E 1.681 10.599 .079 .463 .196

a. Dependent Variable: Price(Rs)

RESULT INTERPRETATION:

From above table we infer that

i) We are 95% Confident that for every single Re increase of Dividend/Share the

Average price per Share increases between the interval 16.099-59.735 Rs.

ii) We are 95% Confident that for every single Re increase of EPS the Average price per

Share increases between the interval 6.803-16.910Rs.

iii) We are 95% Confident that for every single unit increase of P/E ratio the Average

price per Share increases between the interval 1.681-10.599Rs.

Coefficients a

Collinearity Statistics

Model Tolerance VIF

1 Dividend/Share(Rs) 1.000 1.000

2 Dividend/Share(Rs) .386 2.589

EPS(Rs/yr) .386 2.589

3 Dividend/Share(Rs) .359 2.783

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P/E .886 1.129

a. Dependent Variable: Price(Rs)

RESULT INTERPRETATION:

Since none of the predictor variables has a variance inflation factor (VIF) greater than five (all VIFs are

Are less than 5 or Tolerance>0.20), there are no apparent multicollinearity problems; in other words, there

is no variable in the model that is measuring the same relationship/quantity as is measured by another

variable or group of variables.

Excluded Variables d

Partial

Model Beta In t Sig. Correlation

1 EPS(Rs/yr) .459a 3.684 .001 .558

P/E .089a .965 .342 .173

Current Ratio -.046a -.486 .630 -.088

Operating Profit Margin -.036a -.383 .705 -.070

Net Profit Margin .012a .124 .902 .023

Return On Net Worth -.124a -1.230 .228 -.219

2 P/E .209b 2.816 .009 .463

Current Ratio .045b .547 .588 .101

Operating Profit Margin -.007b -.086 .932 -.016

Net Profit Margin .029b .369 .715 .068

Return On Net Worth -.086b -.999 .326 -.182

3 Current Ratio -.077c -.905 .373 -.169

Operating Profit Margin -.066c -.900 .376 -.168

Net Profit Margin .041c .576 .569 .108

Return On Net Worth .006c .072 .943 .014

a. Predictors in the Model: (Constant), Dividend/Share(Rs)

b. Predictors in the Model: (Constant), Dividend/Share(Rs), EPS(Rs/yr)

c. Predictors in the Model: (Constant), Dividend/Share(Rs), EPS(Rs/yr), P/E

d. Dependent Variable: Price(Rs)

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Excluded Variables d

Collinearity Statistics

Minimum

Model Tolerance VIF Tolerance

1 EPS(Rs/yr) .386 2.589 .386

P/E 1.000 1.000 1.000

Current Ratio .978 1.023 .978

Operating Profit Margin .990 1.011 .990

Net Profit Margin 1.000 1.000 1.000

Return On Net Worth .816 1.225 .816

2 P/E .886 1.129 .342

Current Ratio .889 1.125 .351

Operating Profit Margin .979 1.021 .382

Net Profit Margin .996 1.004 .385

Return On Net Worth .804 1.244 .334

3 Current Ratio .668 1.496 .335

Operating Profit Margin .906 1.104 .342

Net Profit Margin .993 1.007 .340

Return On Net Worth .664 1.507 .278

Collinearity Diagnosticsa

Dimen Condition

Model sion Eigenvalue Index

1 1 1.685 1.000

2 .315 2.313

2 1 2.489 1.000

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MRA&FA 2010

2 .393 2.517

3 .118 4.589

3 1 2.988 1.000

2 .728 2.026

3 .187 3.999

4 .097 5.544

a. Dependent Variable: Price(Rs)

Collinearity Diagnosticsa

Variance Proportions

Dimen Dividend/Share

Model sion (Constant) (Rs) EPS(Rs/yr) P/E

1 1 .16 .16

2 .84 .84

2 1 .06 .03 .03

2 .93 .06 .10

3 .01 .91 .87

3 1 .02 .02 .02 .02

2 .03 .04 .08 .22

3 .73 .20 .02 .44

4 .21 .74 .89 .32

a. Dependent Variable: Price(Rs)

Residuals Statisticsa

Minimum Maximum Mean Std. Deviation N

Predicted Value -9.6020403 2.8030347 618.4090909 6.25669217E2 33

E3

Residual - 7.7355230 .00000000 2.53604498E2 33

4.64872833E 7E2

2

Std. Predicted Value -1.004 3.492 .000 1.000 33

Std. Residual -1.745 2.904 .000 .952 33

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MRA&FA 2010

Residuals Statisticsa

Minimum Maximum Mean Std. Deviation N

Predicted Value -9.6020403 2.8030347 618.4090909 6.25669217E2 33

E3

Residual - 7.7355230 .00000000 2.53604498E2 33

4.64872833E 7E2

2

Std. Predicted Value -1.004 3.492 .000 1.000 33

Std. Residual -1.745 2.904 .000 .952 33

a. Dependent Variable: Price(Rs)

Charts

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RESULT INTERPRETATION:

From Above graphs it is clear that the points are close to the linear diagonal line and thus the standardized

residuals are approximately normally distributed. So this satisfies the assumption of Normal Distribution

of with conditional mean zero and variance. So our another assumption for m MRA is found to be true

and Our Share Price Regression Model is valid.

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RESULT INTERPRETATION:

The plot of residual against the all the Standardized values of Predictor variable is somewhat showing the

constancy of residuals across all the set of Predicted values. This plot of Residuals against the predicted

dependent values is not showing any particular pattern, so the all the Residual terms are independent of

each of the standardized Predicted values. This validates the assumption of Homoscedasticity. So our

Regression Model is valid.

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RESULT INTERPRETATION:

The Price is showing linear relationship in majority of the cases with the independent variables. So our

assumption of linearity is also verifies and the Regression model is valid.

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Model2:

Price=

-149.873+37.917*Dividend/Share+11.857*EPS+6.14*P/E

Factor Analysis by Shakti Singh

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FACTOR ANALYSIS

Correlation Matrix

DebttoEquity

EPS(Rs/yr) P/E CurrentRatio ratio

Correlation EPS(Rs/yr) 1.000 -.219 -.302 .523

P/E -.219 1.000 .544 -.040

CurrentRatio -.302 .544 1.000 -.128

DebttoEquity ratio .523 -.040 -.128 1.000

Assets TurnOver Ratio -.095 .111 .034 .216

Operating Profit -.142 .290 .466 .016

Margin

Net Profit Margin -.043 -.035 .010 -.202

Dividend/Share(Rs) .783 -.011 -.149 .364

Return On NetWorth .267 -.319 -.458 -.221

EBDIT(RsCr) .670 -.151 -.237 .745

Correlation Matrix

Assets

TurnOver Operating Net Profit Dividend/Shar

Ratio Profit Margin Margin e(Rs)

Correlation EPS(Rs/yr) -.095 -.142 -.043 .783

P/E .111 .290 -.035 -.011

CurrentRatio .034 .466 .010 -.149

DebttoEquity ratio .216 .016 -.202 .364

Assets TurnOver Ratio 1.000 -.174 -.322 -.070

Operating Profit -.174 1.000 .641 -.102

Margin

Net Profit Margin -.322 .641 1.000 -.007

Dividend/Share(Rs) -.070 -.102 -.007 1.000

Return On NetWorth -.126 -.036 .259 .429

EBDIT(RsCr) -.066 -.048 -.032 .577

Correlation Matrix

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Return On EBDIT(RsCr

NetWorth )

Correlation EPS(Rs/yr) .267 .670

P/E -.319 -.151

CurrentRatio -.458 -.237

DebttoEquity ratio -.221 .745

Assets TurnOver Ratio -.126 -.066

Operating Profit -.036 -.048

Margin

Net Profit Margin .259 -.032

Dividend/Share(Rs) .429 .577

Return On NetWorth 1.000 -.041

EBDIT(RsCr) -.041 1.000

RESULT INTERPRETATION:

The above matrix is a correlation matrix. The PCA can be carried out if the correlation matrix for the

variables contains at least two correlations of .3 or greater. We see from above that there are more than

two correlations of more than 0.3 so we can carry out PCA.

Kaiser-Meyer-Olkin Measure of Sampling .532

Adequacy.

Bartlett's Test of Approx. Chi-Square 156.183

Sphericity df 45

Sig. .000

RESULT INTERPRETATION:

KMO Bartlett’s measure of Sampling Adequacy is an index used to test appropriateness of the factor

analysis.The minimum required valu of KMO is 0.5. The above table shows that the index for the data is

.532 and the chi-square statistics is significant(<0.05). This means that the PCA(Principle Component

Analysis is appropriate for this data.

Communalities

Initial Extraction

EPS(Rs/yr) 1.000 .820

P/E 1.000 .542

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CurrentRatio 1.000 .722

DebttoEquity ratio 1.000 .763

Assets TurnOver Ratio 1.000 .362

Operating Profit 1.000 .820

Margin

Net Profit Margin 1.000 .770

Dividend/Share(Rs) 1.000 .687

Return On NetWorth 1.000 .670

EBDIT(RsCr) 1.000 .809

Extraction Method: Principal Component

Analysis.

RESULT INTERPRETATION:

External Communalities are estimates of the variance in each variable accounted for by each component.

The communalities in this table are all high, which indicates that the extracted components explains the

variables well. If any communalities are very low in a principal components extraction, then we may need

to extract another component.

Total Variance Explained

Initial Eigenvalues Extraction Sums of Squared Loadings

Component Total % of Variance Cumulative % Total % of Variance Cumulative %

1 3.139 31.388 31.388 3.139 31.388 31.388

2 1.946 19.462 50.850 1.946 19.462 50.850

3 1.878 18.784 69.634 1.878 18.784 69.634

4 .988 9.876 79.510

5 .845 8.452 87.962

6 .451 4.509 92.471

7 .303 3.031 95.502

8 .224 2.237 97.738

9 .130 1.304 99.042

10 .096 .958 100.000

Rotation Sums of Squared Loadings

Component Total % of Variance Cumulative %

1 2.841 28.410 28.410

2 2.204 22.037 50.447

3 1.919 19.186 69.634

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4

5

6

7

8

9

10

RESULT INTERPRETATION:

The above table gives the total variance explained. The table gives the total variance contributed by each

component. We see that the percentage of total variance contributed by first component is 31.388, by

second component is 19.462 and by the third component is 18.784. It is also clear from this table that

there are a total of three distinct components for given set of variables

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RESULT INTERPRETATION:

The scree plot gives the number of components against the eigen values and helps to determine the

optimal number of components. The variable having a steep slope indicates that the good percentage of

total variance is explained by that component, hence the component is justified. The shallow slope

indicates that the contribution of total variance is less and the component is not justified.

IN the above plot, the first and third components have steep slope and second component has the shallow

slope. This indicates that ideal number of components are two that is the first and the third component.

Component Matrix a

Component

1 2 3

EPS(Rs/yr) .879 .028 .214

P/E -.400 .476 .394

CurrentRatio -.555 .441 .468

DebttoEquity ratio .637 .559 .209

Assets TurnOver Ratio -.027 .491 -.346

Operating Profit -.330 -.099 .838

Margin

Net Profit Margin -.140 -.579 .644

Dividend/Share(Rs) .774 -.019 .295

Return On NetWorth .352 -.738 -.040

EBDIT(RsCr) .799 .285 .299

Extraction Method: Principal Component Analysis.

a. 3 components extracted.

RESULT INTERPRETATION:

The above table gives each variables component loadings but it’s the next table which is easy to interpret.

Component

1 2 3

EPS(Rs/yr) .856 -.287 .060

P/E -.051 .734 .013

CurrentRatio -.168 .826 .105

DebttoEquity ratio .808 .188 -.274

Assets TurnOver Ratio -.004 .157 -.580

Operating Profit .002 .553 .717

Margin

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Net Profit Margin -.055 .028 .875

Dividend/Share(Rs) .781 -.224 .161

Return On NetWorth .064 -.695 .428

EBDIT(RsCr) .898 -.028 -.040

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

RESULT INTERPRETATION:

This table is the most important for interpretation. The maximum of each row

indicates that the respective variable belongs to respective component. The

variables ‘EPS’,DebttoEquity ratio’,’Dividend/Share’ and ‘EBDIT’ are highly

coorelated and contribute to single first component. ‘’P/E’, ‘CurrentRatio’, ‘Return

on NetWorth’ contribute to the second component. And ‘AssetTurnOverRatio’,

‘OperatingProfitMargin’ and ‘Net Profit Margin’ contribute to the third component.

Component 1 2 3

1 .871 -.483 -.091

2 .309 .681 -.664

3 .382 .550 .742

Extraction Method: Principal Component

Analysis.

Rotation Method: Varimax with Kaiser

Normalization.

Component

1 2 3

EPS(Rs/yr) .292 -.063 .050

P/E .045 .344 .005

CurrentRatio .011 .377 .051

DebttoEquity ratio .308 .159 -.127

Assets TurnOver Ratio .000 .075 -.303

Operating Profit .063 .261 .374

Margin

Net Profit Margin .000 .008 .456

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Dividend/Share(Rs) .272 -.039 .101

Return On NetWorth -.027 -.324 .226

EBDIT(RsCr) .328 .064 -.002

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

Component Scores.

RESULT INTERPRETATION:

This table gives the components scores for each variables. The component scores can be saved for each

case in the Shares.sav file. These scores are useful to replace internally related variables in the regression

analysis. In the above table scores are given component wise. The factor score for each component can be

calculated as the linear combinations of the component scores of that component.

Component 1 2 3

1 1.000 .000 .000

2 .000 1.000 .000

3 .000 .000 1.000

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

Component Scores.

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Correlation Matrix

DebttoEquity

EPS(Rs/yr) P/E CurrentRatio ratio

Correlation EPS(Rs/yr) 1.000 -.219 -.302 .523

P/E -.219 1.000 .544 -.040

CurrentRatio -.302 .544 1.000 -.128

DebttoEquity ratio .523 -.040 -.128 1.000

Assets TurnOver Ratio -.095 .111 .034 .216

Operating Profit -.142 .290 .466 .016

Margin

Net Profit Margin -.043 -.035 .010 -.202

Dividend/Share(Rs) .783 -.011 -.149 .364

Return On NetWorth .267 -.319 -.458 -.221

EBDIT(RsCr) .670 -.151 -.237 .745

Correlation Matrix

Assets

TurnOver Operating Net Profit Dividend/Shar

Ratio Profit Margin Margin e(Rs)

Correlation EPS(Rs/yr) -.095 -.142 -.043 .783

P/E .111 .290 -.035 -.011

CurrentRatio .034 .466 .010 -.149

DebttoEquity ratio .216 .016 -.202 .364

Assets TurnOver Ratio 1.000 -.174 -.322 -.070

Operating Profit -.174 1.000 .641 -.102

Margin

Net Profit Margin -.322 .641 1.000 -.007

Dividend/Share(Rs) -.070 -.102 -.007 1.000

Return On NetWorth -.126 -.036 .259 .429

EBDIT(RsCr) -.066 -.048 -.032 .577

Correlation Matrix

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Return On EBDIT(RsCr

NetWorth )

Correlation EPS(Rs/yr) .267 .670

P/E -.319 -.151

CurrentRatio -.458 -.237

DebttoEquity ratio -.221 .745

Assets TurnOver Ratio -.126 -.066

Operating Profit -.036 -.048

Margin

Net Profit Margin .259 -.032

Dividend/Share(Rs) .429 .577

Return On NetWorth 1.000 -.041

EBDIT(RsCr) -.041 1.000

RESULT INTERPRETATION:

The above matrix is a correlation matrix. The Common Factor Analysis can be carried out if the

correlation matrix for the variables contains at least two correlations of .3 or greater. We see from above

that there are more than two correlations of more than 0.3 so we can carry out CFA.

Kaiser-Meyer-Olkin Measure of Sampling .532

Adequacy.

Bartlett's Test of Approx. Chi-Square 156.183

Sphericity df 45

Sig. .000

RESULT INTERPRETATION:

KMO Bartlett’s measure of Sampling Adequacy is an index used to test appropriateness of the factor

analysis. The minimum required valu of KMO is 0.5. The above table shows that the index for the data is

.532 and the chi-square statistics is significant(<0.05). This means that the CFA(Common Component

Analysis) is appropriate for this data.

Anti-image Matrices

DebttoEquity

EPS(Rs/yr) P/E CurrentRatio ratio

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Covariance P/E .092 .588 -.053 .012

CurrentRatio .045 -.053 .336 .077

DebttoEquity ratio -.050 .012 .077 .273

Assets TurnOver Ratio .055 -.055 -.024 -.170

Operating Profit -.010 -.085 -.179 -.112

Margin

Net Profit Margin .009 .052 .118 .112

Dividend/Share(Rs) -.142 -.126 -.103 -.003

Return On NetWorth .034 .125 .184 .081

EBDIT(RsCr) -.017 .053 .048 -.146

a

Anti-image EPS(Rs/yr) .749 .234 .154 -.188

Correlation P/E .234 .609a

-.119 .030

a

CurrentRatio .154 -.119 .464 .256

DebttoEquity ratio -.188 .030 .256 .551a

Assets TurnOver Ratio .125 -.083 -.048 -.376

Operating Profit -.036 -.211 -.588 -.409

Margin

Net Profit Margin .027 .111 .334 .350

Dividend/Share(Rs) -.616 -.364 -.393 -.012

Return On NetWorth .116 .285 .554 .271

EBDIT(RsCr) -.066 .135 .163 -.550

Anti-image Matrices

Assets

TurnOver Operating Net Profit

Ratio Profit Margin Margin

Anti-image EPS(Rs/yr) .055 -.010 .009

Covariance P/E -.055 -.085 .052

CurrentRatio -.024 -.179 .118

DebttoEquity ratio -.170 -.112 .112

Assets TurnOver Ratio .752 .060 .040

Operating Profit .060 .275 -.231

Margin

Net Profit Margin .040 -.231 .373

Dividend/Share(Rs) -.005 .064 -.023

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EBDIT(RsCr) .098 .006 -.044

Anti-image EPS(Rs/yr) .125 -.036 .027

Correlation P/E -.083 -.211 .111

CurrentRatio -.048 -.588 .334

DebttoEquity ratio -.376 -.409 .350

a

Assets TurnOver Ratio .481 .132 .075

Operating Profit .132 .378a -.723

Margin

Net Profit Margin .075 -.723 .439a

Dividend/Share(Rs) -.012 .272 -.082

Return On NetWorth -.083 -.327 .027

EBDIT(RsCr) .223 .022 -.142

Anti-image Matrices

Dividend/Shar Return On EBDIT(RsCr

e(Rs) NetWorth )

Anti-image EPS(Rs/yr) -.142 .034 -.017

Covariance P/E -.126 .125 .053

CurrentRatio -.103 .184 .048

DebttoEquity ratio -.003 .081 -.146

Assets TurnOver Ratio -.005 -.041 .098

Operating Profit .064 -.098 .006

Margin

Net Profit Margin -.023 .010 -.044

Dividend/Share(Rs) .203 -.159 -.083

Return On NetWorth -.159 .328 .084

EBDIT(RsCr) -.083 .084 .259

Anti-image EPS(Rs/yr) -.616 .116 -.066

Correlation P/E -.364 .285 .135

CurrentRatio -.393 .554 .163

DebttoEquity ratio -.012 .271 -.550

Assets TurnOver Ratio -.012 -.083 .223

Operating Profit .272 -.327 .022

Margin

Net Profit Margin -.082 .027 -.142

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Dividend/Share(Rs) .508a -.615 -.361

Return On NetWorth -.615 .400a .288

EBDIT(RsCr) -.361 .288 .691a

Communalities

Initial Extraction

EPS(Rs/yr) .739 .784

P/E .412 .302

CurrentRatio .664 .554

DebttoEquity ratio .727 .672

Assets TurnOver Ratio .248 .140

Operating Profit .725 .919

Margin

Net Profit Margin .627 .619

Dividend/Share(Rs) .797 .553

Return On NetWorth .672 .591

EBDIT(RsCr) .741 .766

Extraction Method: Principal Axis Factoring.

RESULT INTERPRETATION:

Initial Communalities are the proportion of the variance accounted for in each variable by the rest of the

variables. Small communalities for the variable indicates that the proportion of the variance that this

variable shares with other variables is too small. Thus this variable does not fit the factor solution.IN the

above table most of the intial communalities are high indicating that all the variables share a good amount

of variance with each other, an ideal solution for factor analysis.

Extraction Communalities are the estimates of the variance in each variable accounted for by the factors

in the factor solution. The communalities in this table are all high. It tells that the extracted factors

represents the variables well.

Initial Eigenvalues Extraction Sums of Squared Loadings

Factor Total % of Variance Cumulative % Total % of Variance Cumulative %

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2 1.946 19.462 50.850 1.593 15.928 44.096

3 1.878 18.784 69.634 1.490 14.897 58.993

4 .988 9.876 79.510

5 .845 8.452 87.962

6 .451 4.509 92.471

7 .303 3.031 95.502

8 .224 2.237 97.738

9 .130 1.304 99.042

10 .096 .958 100.000

Rotation Sums of Squared Loadings

Factor Total % of Variance Cumulative %

1 2.525 25.252 25.252

2 1.801 18.008 43.260

3 1.573 15.733 58.993

4

5

6

7

8

9

10

RESULT INTERPRETATION:

The Output gives the variance explained by the initial solution. This table gives the total variance

contributed by each component. We may note that the percentage of total variance contributed by first

component is 31.388, by second component is 19.462 and by the third component is 18.784. So

percentage of variances is highest for the first factor and decreases thereafter. It is also clear from the

table that there are a total of three distinct factors for each given set of variables.

RESULT INTERPRETATION:

The below SCree Plot give the number of factors against the eigen values and helps in determining

optimal number of factors. IN the below plot only first and third factors have steep slope and eigen values

greater than 1. Although 2nd factor has eigen value greater then 1 but it has a shallow slope which

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indicates the contribution of total variance by this 2nd factor is less. Hence the ideal number of factors are

two i.e. 1st and 3rd factors.

Factor Matrix a

Factor

1 2 3

EPS(Rs/yr) .865 .189 -.016

P/E -.316 .243 .378

CurrentRatio -.487 .354 .437

DebttoEquity ratio .619 .176 .508

Assets TurnOver Ratio -.012 -.225 .298

Operating Profit -.340 .896 -.027

Margin

Net Profit Margin -.147 .607 -.478

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Dividend/Share(Rs) .706 .223 -.065

Return On NetWorth .298 .010 -.708

EBDIT(RsCr) .790 .263 .270

Extraction Method: Principal Axis Factoring.

a. 3 factors extracted. 24 iterations required.

Factor

1 2 3

EPS(Rs/yr) .822 -.323 .060

P/E -.071 .545 .007

CurrentRatio -.161 .722 .081

DebttoEquity ratio .767 .174 -.233

Assets TurnOver Ratio .002 .118 -.354

Operating Profit .017 .570 .771

Margin

Net Profit Margin -.060 .007 .785

Dividend/Share(Rs) .680 -.269 .134

Return On NetWorth .042 -.660 .392

EBDIT(RsCr) .873 -.040 -.042

Extraction Method: Principal Axis Factoring.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 5 iterations.

RESULT INTERPRETATION:

This table is the most important for interpretation. The maximum of each row

indicates that the respective variable belongs to respective component.

The variables ‘EPS’,DebttoEquity ratio’,’Dividend/Share’ and ‘EBDIT’ are highly

coorelated and contribute to single first factor which can be named as

‘Comprehensive Earnings of the Company’.

‘’P/E’, ‘CurrentRatio’, ‘Return on NetWorth’ are highly coorelated and contribute

to the second factor which can be named as ‘Financial Leverage of the Company’.

‘AssetTurnOverRatio’, ‘OperatingProfitMargin’ and ‘Net Profit Margin’ are highly

coorelated and contribute to the third factor which can be named as ‘Profitability of

the Company’.

57 | P a g e

MRA&FA 2010

FACTORS Variables

Factor1 EarningsPerShare, DividendperShare and Earnings Before Depriciation,Interest

Comprehensive abd taxes and Debt to equity Ratio.

Earnings of the

Company

Factor3 ‘AssetTurnOverRatio’, ‘OperatingProfitMargin’ and ‘Net Profit Margin’.

Profitability

Margins of the

Company

It Implies that the an Investor before investing in the Share Market should consider the Above important

factors which are Comprehensive Earnings of the Company over the years and its Profitability

Margins e.g. How much profit Company is able to generate per unit of sales.

Factor 1 2 3

1 .878 -.465 -.116

2 .362 .483 .798

3 .315 .742 -.592

Extraction Method: Principal Axis

Factoring.

Rotation Method: Varimax with Kaiser

Normalization.

58 | P a g e

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