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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

By: Shakti Singh Rathore251

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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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MULTIPLE REGRESSION ANALYSIS

NPar Tests

One-Sample Kolmogorov-Smirnov Test


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.

One-Sample Kolmogorov-Smirnov Test


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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One-Sample Kolmogorov-Smirnov Test


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.

One-Sample Kolmogorov-Smirnov Test


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.

Regression With Enter Method

The descriptive statistics provide overall distributions of 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

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
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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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 .
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

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
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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1 Return On Net . Enter


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.

Method of entering the variables is enter.


Model Summaryb

Adjusted R Std. Error of


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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R Square
Change F Change df1 df2 Sig. F Change Durbin-Watson
1 .877 25.385 7 25 .000 1.856

b. Dependent Variable: Price(Rs)

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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Current Ratio -6.138 37.878 -.018 -.162 .873


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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1 (Constant) -538.503 232.721


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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Net Profit Margin .452 2.211


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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7 .63 .75 .04 .16


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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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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Regression with Step-Wise Method

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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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
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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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
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

Adjusted R Std. Error of


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

d. Dependent Variable: Price(Rs)


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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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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EPS(Rs/yr) .342 2.923


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

d. Dependent Variable: Price(Rs)

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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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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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

PRINCIPLE COMPONENT 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.

KMO and Bartlett's Test


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

Total Variance Explained


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

Extraction Method: Principal Component Analysis.


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.

Rotated Component Matrix a


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 Transformation Matrix


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 Score Coefficient Matrix


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 Score Covariance Matrix


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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COMMON 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 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.

KMO and Bartlett's Test


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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Anti-image EPS(Rs/yr) .261 .092 .045 -.050


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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Return On NetWorth -.041 -.098 .010


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

a. Measures of Sampling Adequacy(MSA)

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.

Total Variance Explained


Initial Eigenvalues Extraction Sums of Squared Loadings
Factor Total % of Variance Cumulative % Total % of Variance Cumulative %

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1 3.139 31.388 31.388 2.817 28.168 28.168


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

Total Variance Explained


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

Extraction Method: Principal Axis Factoring.


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.

Rotated Factor Matrix a


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’.

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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 Transformation Matrix


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.

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