Principal component analysis and multidimensional scaling as methods for studying financial condition: A case study of Ryanair
Principal component analysis and multidimensional scaling as methods for studying financial condition: A case study of Ryanair

Summary/Abstract: Investors who wish to invest their capital in the stocks of a given company have to know its financial condition and environment. They should comprehensively analyse the business in both micro-economic and macroeconomic terms. To this end, a fundamental analysis is used, which consists of several stages. One of its elements is a ratio analysis, which allows indicators to be compared with the relevant norms and conclusions to be drawn. However, the results are limited to singular aspects of financial condition. A wider view of the company and a comparison with others similar to it can be obtained through statistical multivariate methods. Such a non-classic approach is proposed in this article. A ratio analysis of financial condition is performed using the example of Ryanair and the results of principal component analysis and multidimensional scaling. Two hypotheses are proved: the financial condition of Ryanair is similar to other low-budget airlines and the values of variables describing the same aspect of the company's financial condition are correlated. The software program Statistica was used to analyse the data.

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