Financial performance evaluation of the Czech agricultural companies with factor analysis

Abstract

The article is focused on determination of the financial indicators influencing corporate performance of agricultural companies. Traditional financial indicators (calculated from accounting data) are still used to evaluate performance level; this approach to evaluation and comparison of performance has been considered to be the most appropriate approach over a long period of time in spite of different accounting and financial indicators. Data from 1985 agricultural companies have been analysed. Correlation analysis and factor analysis have been employed to eliminate information duplication and reduce dimensionality. Application of these methods has reduced the basic set, originally formed by thirteen key financial indicators, into three key groups (indexes): operational factor, profit factor and return factor. At the same time, Pearson’s chi-square test has indicated the dependency between the above mentioned factors (indices) and company size; the most significant factor being the “operational factor” with the strongest power in relation to the company size.