Calculation of selected financial indicators.
\\n\\n
More than half of the publishers listed alongside IntechOpen (18 out of 30) are Social Science and Humanities publishers. IntechOpen is an exception to this as a leader in not only Open Access content but Open Access content across all scientific disciplines, including Physical Sciences, Engineering and Technology, Health Sciences, Life Science, and Social Sciences and Humanities.
\\n\\nOur breakdown of titles published demonstrates this with 47% PET, 31% HS, 18% LS, and 4% SSH books published.
\\n\\n“Even though ItechOpen has shown the potential of sci-tech books using an OA approach,” other publishers “have shown little interest in OA books.”
\\n\\nAdditionally, each book published by IntechOpen contains original content and research findings.
\\n\\nWe are honored to be among such prestigious publishers and we hope to continue to spearhead that growth in our quest to promote Open Access as a true pioneer in OA book publishing.
\\n\\n\\n\\n
\\n"}]',published:!0,mainMedia:{caption:"IntechOpen Maintains",originalUrl:"/media/original/113"}},components:[{type:"htmlEditorComponent",content:'
Simba Information has released its Open Access Book Publishing 2020 - 2024 report and has again identified IntechOpen as the world’s largest Open Access book publisher by title count.
\n\nSimba Information is a leading provider for market intelligence and forecasts in the media and publishing industry. The report, published every year, provides an overview and financial outlook for the global professional e-book publishing market.
\n\nIntechOpen, De Gruyter, and Frontiers are the largest OA book publishers by title count, with IntechOpen coming in at first place with 5,101 OA books published, a good 1,782 titles ahead of the nearest competitor.
\n\nSince the first Open Access Book Publishing report published in 2016, IntechOpen has held the top stop each year.
\n\n\n\nMore than half of the publishers listed alongside IntechOpen (18 out of 30) are Social Science and Humanities publishers. IntechOpen is an exception to this as a leader in not only Open Access content but Open Access content across all scientific disciplines, including Physical Sciences, Engineering and Technology, Health Sciences, Life Science, and Social Sciences and Humanities.
\n\nOur breakdown of titles published demonstrates this with 47% PET, 31% HS, 18% LS, and 4% SSH books published.
\n\n“Even though ItechOpen has shown the potential of sci-tech books using an OA approach,” other publishers “have shown little interest in OA books.”
\n\nAdditionally, each book published by IntechOpen contains original content and research findings.
\n\nWe are honored to be among such prestigious publishers and we hope to continue to spearhead that growth in our quest to promote Open Access as a true pioneer in OA book publishing.
\n\n\n\n
\n'}],latestNews:[{slug:"intechopen-supports-asapbio-s-new-initiative-publish-your-reviews-20220729",title:"IntechOpen Supports ASAPbio’s New Initiative Publish Your Reviews"},{slug:"webinar-introduction-to-open-science-wednesday-18-may-1-pm-cest-20220518",title:"Webinar: Introduction to Open Science | Wednesday 18 May, 1 PM CEST"},{slug:"step-in-the-right-direction-intechopen-launches-a-portfolio-of-open-science-journals-20220414",title:"Step in the Right Direction: IntechOpen Launches a Portfolio of Open Science Journals"},{slug:"let-s-meet-at-london-book-fair-5-7-april-2022-olympia-london-20220321",title:"Let’s meet at London Book Fair, 5-7 April 2022, Olympia London"},{slug:"50-books-published-as-part-of-intechopen-and-knowledge-unlatched-ku-collaboration-20220316",title:"50 Books published as part of IntechOpen and Knowledge Unlatched (KU) Collaboration"},{slug:"intechopen-joins-the-united-nations-sustainable-development-goals-publishers-compact-20221702",title:"IntechOpen joins the United Nations Sustainable Development Goals Publishers Compact"},{slug:"intechopen-signs-exclusive-representation-agreement-with-lsr-libros-servicios-y-representaciones-s-a-de-c-v-20211123",title:"IntechOpen Signs Exclusive Representation Agreement with LSR Libros Servicios y Representaciones S.A. de C.V"},{slug:"intechopen-expands-partnership-with-research4life-20211110",title:"IntechOpen Expands Partnership with Research4Life"}]},book:{item:{type:"book",id:"6617",leadTitle:null,fullTitle:"Immunoregulatory Aspects of Immunotherapy",title:"Immunoregulatory Aspects of Immunotherapy",subtitle:null,reviewType:"peer-reviewed",abstract:"Immunotherapy is an innovative, leading and valuable approach to the treatment and control of many diseases. It can solve many problems of public health worldwide. Many people in numerous countries are suffering from a wide range of diseases (communicable and non-communicable) that can be cured or controlled by the immune system and immunotherapy. Some immunological diseases (i.e. allergic reactions and asthma, autoimmune disease, immunodeficiency disease, hypersensitivity reactions, etc.) have immune response pathophysiology and by controlling immune system mechanisms, these diseases can be controlled and cured. Immunoregulatory Aspects of Immunotherapy focuses on immune system mechanism, diagnosis, treatment and other related problems. The chapters have applicable and scientific data in immunotherapeutic approaches based on medical sciences, and would be of benefit to all researchers in immunology, allergy and asthma fields. The book discusses the prevention, diagnosis, treatment and follow-up of patients who have dangerous diseases. We hope this book will be a new approach to the immunotherapy of diseases and will improve public health and wellbeing.",isbn:"978-1-78923-509-8",printIsbn:"978-1-78923-508-1",pdfIsbn:"978-1-83881-592-9",doi:"10.5772/intechopen.71636",price:119,priceEur:129,priceUsd:155,slug:"immunoregulatory-aspects-of-immunotherapy",numberOfPages:240,isOpenForSubmission:!1,isInWos:null,isInBkci:!1,hash:"a2f42aa78dd846d4a1679066e72a7285",bookSignature:"Seyyed Shamsadin Athari",publishedDate:"August 1st 2018",coverURL:"https://cdn.intechopen.com/books/images_new/6617.jpg",numberOfDownloads:11968,numberOfWosCitations:7,numberOfCrossrefCitations:10,numberOfCrossrefCitationsByBook:0,numberOfDimensionsCitations:19,numberOfDimensionsCitationsByBook:0,hasAltmetrics:1,numberOfTotalCitations:36,isAvailableForWebshopOrdering:!0,dateEndFirstStepPublish:"October 19th 2017",dateEndSecondStepPublish:"November 9th 2017",dateEndThirdStepPublish:"January 8th 2018",dateEndFourthStepPublish:"March 29th 2018",dateEndFifthStepPublish:"May 28th 2018",currentStepOfPublishingProcess:5,indexedIn:"1,2,3,4,5,6",editedByType:"Edited by",kuFlag:!1,featuredMarkup:null,editors:[{id:"139889",title:"Dr.",name:"Seyyed Shamsadin",middleName:null,surname:"Athari",slug:"seyyed-shamsadin-athari",fullName:"Seyyed Shamsadin Athari",profilePictureURL:"https://mts.intechopen.com/storage/users/139889/images/system/139889.jpeg",biography:"Dr. Seyyed Shamsadin Athari, MPH, Ph.D., is an Assistant Professor of Immunology, Department of Immunology, School of medicine, Zanjan University of Medical Sciences, Iran. He completed postdocs in allergy and asthma toxicology and, asthma management and controlling a network fellowship. He has published more than 30 books and 110 papers in international journals in immunology, allergy, and asthma. He is also on the editorial board of more than seventy journals. He has several scientific inventions to his credit and has recorded gene sequences in a gene bank. Dr. Athari has been invited as a top speaker at more than forty international congresses and symposiums. He is a recipient of several top researcher and young scientist awards.",institutionString:"Zanjan University of Medical Sciences",position:null,outsideEditionCount:0,totalCites:0,totalAuthoredChapters:"3",totalChapterViews:"0",totalEditedBooks:"3",institution:{name:"Zanjan University of Medical Sciences",institutionURL:null,country:{name:"Iran"}}}],equalEditorOne:null,equalEditorTwo:null,equalEditorThree:null,coeditorOne:null,coeditorTwo:null,coeditorThree:null,coeditorFour:null,coeditorFive:null,topics:[{id:"150",title:"Pure Immunology",slug:"pure-immunology"}],chapters:[{id:"60540",title:"Immune System Disorders: Hypersensitivity and Autoimmunity",doi:"10.5772/intechopen.75794",slug:"immune-system-disorders-hypersensitivity-and-autoimmunity",totalDownloads:2490,totalCrossrefCites:3,totalDimensionsCites:8,hasAltmetrics:1,abstract:"The immune response is known as a physiological mechanism to protect the body, providing defense to different systems that compose it and allowing its proper functioning. The ability to keep the organism free from foreign agents depends on the mechanisms of natural resistance or innate immunity, as well as the resistance that can develop over time through adaptive immunity. However, when these defense mechanisms fail, it can trigger injuries and diseases in the tissues, such as hypersensitivity, which is characterized as an excessive and undesirable reaction, produced by the immune system; as well as autoimmunity, which refers to the failure of the mechanisms of immunological tolerance, causing the reaction of the immune system against the body itself.",signatures:"José Luis Muñoz-Carrillo, Flor Pamela Castro-García, Francisca\nChávez-Rubalcaba, Isabel Chávez-Rubalcaba, José Luis Martínez-\nRodríguez and Marcela Elizabeth Hernández-Ruiz",downloadPdfUrl:"/chapter/pdf-download/60540",previewPdfUrl:"/chapter/pdf-preview/60540",authors:[null],corrections:null},{id:"60755",title:"Immune Checkpoint Blockade and Immune Monitoring",doi:"10.5772/intechopen.74688",slug:"immune-checkpoint-blockade-and-immune-monitoring",totalDownloads:1431,totalCrossrefCites:1,totalDimensionsCites:1,hasAltmetrics:0,abstract:"The concept of immunological surveillance, a monitoring process in which the immune system detects and destroys by several effector mechanisms, virally infected and neoplastic transformed cells in the body, was developed more than 50 years ago. Based on current research, it is clear that the immune system can recognize and eliminate transformed cells. An increasing number of studies has investigated the immune system in cancer patients and how it is prone to immunosuppression, due in part to the decrease of lymphocyte proliferation and cytotoxic activity. Such weakened immune system is then unable to fully accomplish its role in immunological surveillance, allowing nascent transformed cells to escape the selective pressure of the immune system. The main goal of cancer immunotherapy has been to reawaken the immune system from a suppressive slumber to enable it to attack cancer cells once again. As the results from the last 10 years attest, cancer immunotherapy is the best strategy to restore the activity of the immune system and unleash its potential to destroy cancer cells in cancer patients. This chapter aims to discuss the recent findings on immune monitoring studies and the use of immune checkpoint inhibition in cancer immunotherapy.",signatures:"Jorge Augusto Borin Scutti, Luiz R. Travassos and Luiz M. Vence",downloadPdfUrl:"/chapter/pdf-download/60755",previewPdfUrl:"/chapter/pdf-preview/60755",authors:[null],corrections:null},{id:"59743",title:"New Strategies to Improve Therapeutic Vaccines",doi:"10.5772/intechopen.74900",slug:"new-strategies-to-improve-therapeutic-vaccines",totalDownloads:1272,totalCrossrefCites:1,totalDimensionsCites:1,hasAltmetrics:0,abstract:"Vaccination represents a viable and attractive strategy for therapeutic treatment of cancers by the power of a patient’s own immune system. Major advances in cellular and molecular immunology have led to the approval of the first therapeutic cancer vaccine by FDA. However, the development of cancer vaccines remains infant. Maximizing the therapeutic efficacy while minimizing side effects of the therapeutic cancer vaccine remains key challenges to this field. In this review, we summarized the recently developed strategies to induce anti-tumor responses in vivo to improve the outcomes of cancer vaccines, with an emphasis on the guiding principles that are critical for rational design of effective and safe vaccines against cancers.",signatures:"Chunsong Yu and Haipeng Liu",downloadPdfUrl:"/chapter/pdf-download/59743",previewPdfUrl:"/chapter/pdf-preview/59743",authors:[null],corrections:null},{id:"61330",title:"Therapeutic Potentials of IL-10 versus IL-12",doi:"10.5772/intechopen.76914",slug:"therapeutic-potentials-of-il-10-versus-il-12",totalDownloads:1110,totalCrossrefCites:0,totalDimensionsCites:2,hasAltmetrics:0,abstract:"Cytokines are low molecular weight proteins having roles in essential biological processes, particularly for the immune system. As they have a key role to play, an abnormality in their function can lead to wide variety of diseases (clinical consequences). Thus using the cytokines as therapeutic targets has been an area of active research. Of the entire family, we would like to shed light on two major ones IL-10 and IL-12 having an array of roles in cellular response to infection and autoimmunity. IL-12 is a pro-inflammatory cytokine that has been shown to enhance IFN-γ producing T cell responses and has been widely tested as a vaccine adjuvant. Many studies have shown that IL-12 acts as a link between innate and adaptive immunity by inducing IFN-γ production and polarizing naive CD4 T cells to become Th1 cells. It also has roles in CD8 T cell differentiation. On the other hand, IL-10 is an anti-inflammatory cytokine and has role in maturation of memory CD8 T-cell. It also plays a critical role in preventing autoimmunity and also limits tissue injury by interfering with the intensity and duration of immune response. We would thus like to discuss in details about the therapeutic use of these cytokines for infections as well as diseases such as cancer, autoimmune disorders etc.",signatures:"Vishakha Bhurani and Sarat Kumar Dalai",downloadPdfUrl:"/chapter/pdf-download/61330",previewPdfUrl:"/chapter/pdf-preview/61330",authors:[null],corrections:null},{id:"60355",title:"Immune System Modulation Produced by Ultraviolet Radiation",doi:"10.5772/intechopen.75450",slug:"immune-system-modulation-produced-by-ultraviolet-radiation",totalDownloads:1143,totalCrossrefCites:1,totalDimensionsCites:2,hasAltmetrics:0,abstract:"Exposure to ultraviolet radiation (UVr) contained in sunlight is a major cause of skin illness such as sunburn, aging and cancer. UVr triggers local effects on the skin, which involve local inflammation, tissue remodeling, regulatory cytokines release and migration of dendritic cells (DCs). However, these localized effects on the exposed area are not the only ones that take place after sun or UVr exposure. A less known effect of UVr is the modulation of systemic immunity, through the generation of specific regulatory cells. These cells are induced, at least in part, by skin-migrating tolerogenic DCs. Moreover, bone marrow cell precursors can also be biased to a tolerogenic or suppressor phenotype. The sunlight- or UVr-induced immune system modulation can cause skin disorders like skin cancer and cutaneous photosensitivity in Lupus, but it also may be useful to treat cutaneous pathologies such as psoriasis and vitiligo. Moreover, the systemic immunosuppressor effect of UVr exposure may also be useful to treat autoimmunity of internal organs. Finally, as an inducer of cutaneous inflammatory response, UV phototherapy may also be useful in the treatment of cutaneous infections. Overall, UVr has profound immunomodulatory capacity that can be beneficial or deleterious for human health.",signatures:"Eliana M. Cela, Mariela L. Paz, Juliana Leoni and Daniel H. González\nMaglio",downloadPdfUrl:"/chapter/pdf-download/60355",previewPdfUrl:"/chapter/pdf-preview/60355",authors:[null],corrections:null},{id:"61006",title:"Toll-Like Receptors: The Key of Immunotherapy in MSCs",doi:"10.5772/intechopen.76644",slug:"toll-like-receptors-the-key-of-immunotherapy-in-mscs",totalDownloads:1087,totalCrossrefCites:3,totalDimensionsCites:3,hasAltmetrics:0,abstract:"Human mesenchymal stem cells (MSCs) are potential candidates for various applications in the fields of immunotherapy. Their multilineage differentiation capability and immune modulatory features allow their prospective application for the management of different immunological circumstances. However, the local microenvironment, in addition to the source of the MSCs can control diverse biological features of the cells. Indeed, throughout their therapeutic application, MSCs may interact with their microenvironment through their expressed toll-like-receptors (TLRs), producing immune modulating reactions. Stimulation of MSCs before or within the potential treatment procedures with distinct TLR ligands may assist as an effective step controlling the biological function of the MSCs as needed in different therapeutic stages of the disease.",signatures:"Mohamed K. Mekhemar, Christof E. Dörfer and Karim M. Fawzy El-\nSayed",downloadPdfUrl:"/chapter/pdf-download/61006",previewPdfUrl:"/chapter/pdf-preview/61006",authors:[null],corrections:null},{id:"60000",title:"Immunotherapeutic Approaches of Rheumatoid Arthritis and the Implication on Novel Interventions for Refractoriness",doi:"10.5772/intechopen.75553",slug:"immunotherapeutic-approaches-of-rheumatoid-arthritis-and-the-implication-on-novel-interventions-for-",totalDownloads:1186,totalCrossrefCites:0,totalDimensionsCites:0,hasAltmetrics:0,abstract:"Rheumatoid arthritis is an autoimmune disorder involving the chronic inflammation of affected joints which lead to the distortion and eventually destruction of the articular tissues. Clinically, many therapeutic methods are being used for RA treatment. Non-steroidal anti-inflammatory drugs (NSAIDs), steroid, and disease-modifying anti-rheumatic drugs (DMARDs) are the three main categories of intervention approaches. Among which DMARDs, targeting mainly the release of pro-inflammatory cytokines, demonstrated high efficacy because of its direct drug action that alter the underlying disease mechanisms rather than simply to mediate symptoms relieve. However, the use of DMARDs also accompanying some unwanted adverse side effects, in particular, the development of refractoriness, which hampers the successful rate of treatment. In this chapter, the conventional RA drugs will be reviewed, focusing on the currently used and latest development of DMARDs. Novel methods that could improve RA pathogenesis will also be introduced. Because of the critical role of refractory RA, the progress of the disease to develop resistance to standard drug treatment will also be described. Finally, innovative RA therapeutic methods inspired by researches concerning the pathogenesis and contemporary treatments of RA will be discussed.",signatures:"Simon Wing-Fai Mok, Betty Yuen-Kwan Law, Vincent Kam-Wai\nWong and Liang Liu",downloadPdfUrl:"/chapter/pdf-download/60000",previewPdfUrl:"/chapter/pdf-preview/60000",authors:[null],corrections:null},{id:"60479",title:"Present and Future Therapies for Alzheimer’s Disease",doi:"10.5772/intechopen.75449",slug:"present-and-future-therapies-for-alzheimer-s-disease",totalDownloads:1073,totalCrossrefCites:0,totalDimensionsCites:1,hasAltmetrics:0,abstract:"Alzheimer’s disease (AD) is an incurable, progressive neurodegenerative disorder and the most common type of dementia. Although four kinds of drugs are currently available for AD, these are symptomatic treatments and do not halt disease progression. Therefore, there is an urgent need for development of curative drugs for AD. Amyloid plaques are the main disease hallmark observed in AD brains. As amyloid-β (Aβ) is a major constituent of amyloid plaques, Aβ has been supposed to be pathogenic for AD (amyloid hypothesis). Thus, current, mainstream AD drug development is based around this hypothesis. In particular, both active and passive immunotherapies are aggressively employed. However, most clinical trials based on this hypothesis, including immunotherapies, failed to improve cognitive impairment in AD. Therefore, it is likely that AD onset is caused by factors besides Aβ. We have previously demonstrated that the intracellular domain of amyloid precursor protein (AICD) induces dynamic changes in gene expression and neuron-specific apoptosis, probably related to AD pathogenesis. Therefore, AICD may be a favorable target for AD therapies. In this chapter, current trials for AD therapies, especially immunotherapies targeting Aβ, are summarized. In addition, therapies targeting tau, another possible pathogenic molecule, are also described. Furthermore, we discuss the possibility of AICD as a novel therapeutic target for AD.",signatures:"Hisashi Nagase and Kohzo Nakayama",downloadPdfUrl:"/chapter/pdf-download/60479",previewPdfUrl:"/chapter/pdf-preview/60479",authors:[{id:"88080",title:"Dr.",name:"Kohzo",surname:"Nakayama",slug:"kohzo-nakayama",fullName:"Kohzo Nakayama"},{id:"124609",title:"Dr.",name:"Hisashi",surname:"Nagase",slug:"hisashi-nagase",fullName:"Hisashi Nagase"}],corrections:null},{id:"60496",title:"Serological Biomarkers for the Prediction and Detection of Human Papillomavirus Associated Cancers",doi:"10.5772/intechopen.75143",slug:"serological-biomarkers-for-the-prediction-and-detection-of-human-papillomavirus-associated-cancers",totalDownloads:1178,totalCrossrefCites:1,totalDimensionsCites:1,hasAltmetrics:0,abstract:"High-risk human papillomavirus (HPV) types are not only associated to uterine cervical cancer, but also to a fraction of cancers of the vulva, vagina, penis, anus, head and neck. An HPV infection generates a protective humoral immune response against the capsid proteins L1 and L2; however, an immune response against other HPV early proteins is also generated. This latter is not a protective response, but those antibodies can be useful as biomarkers of the status of the infection and/or the stage of the cancer lesion. Until now, there are no conclusive results regarding the use of anti-HPV antibodies as biomarkers in diagnosis. In this review, we hereby summarized the actual panorama of the humoral immune response against different HPV early proteins during the development of the disease as possible biomarkers for the prediction and detection of HPV-associated cancers.",signatures:"Lourdes Gutierrez-Xicotencatl, Azucena Salazar-Piña, Lilia Chihu-\nAmparan and Adolfo Pedroza-Saavedra",downloadPdfUrl:"/chapter/pdf-download/60496",previewPdfUrl:"/chapter/pdf-preview/60496",authors:[null],corrections:null}],productType:{id:"1",title:"Edited Volume",chapterContentType:"chapter",authoredCaption:"Edited by"},subseries:null,tags:null},relatedBooks:[{type:"book",id:"5776",title:"Allergen",subtitle:null,isOpenForSubmission:!1,hash:"20e406e7a94419ea2beba834a8030a79",slug:"allergen",bookSignature:"Seyyed Shamsadin Athari",coverURL:"https://cdn.intechopen.com/books/images_new/5776.jpg",editedByType:"Edited by",editors:[{id:"139889",title:"Dr.",name:"Seyyed Shamsadin",surname:"Athari",slug:"seyyed-shamsadin-athari",fullName:"Seyyed Shamsadin Athari"}],equalEditorOne:null,equalEditorTwo:null,equalEditorThree:null,productType:{id:"1",chapterContentType:"chapter",authoredCaption:"Edited by"}},{type:"book",id:"6963",title:"Immune Response Activation and Immunomodulation",subtitle:null,isOpenForSubmission:!1,hash:"ac7ce04a130a57849a8d3adb55d688ed",slug:"immune-response-activation-and-immunomodulation",bookSignature:"Rajeev K. 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The established financial reporting system within an entity is the basic source of information on its financial position and results. The economic and financial globalization of the world market has emphasized the importance of high quality financial reporting. For the business decision-making process, financial and audit reports are the main source of information, as they contain information on financial position, business results, changes in equity, cash-flows and other reliable information [1]. Development of the capital market and the increase in the number of interested parties (investors) created even higher demand of reliable, on time and fair financial statements as the main results of financial reporting. The regulation of the relationship between the state and society, owners of capital and management, various stakeholders and society, and others; has been further improved by a quality financial reporting and audit process. However, in order to fulfill their main purpose for all interested parties, financial statements must provide information that is true, objective, comprehensible, comparable and uniform [2]. In the first place, financial statements have to be publicly available, which is usually regulated by law. For example, Law on Accounting of the Republic of Serbia prescribes that all business entities have to submit their financial reports to the competent institution which later publishes them on the official internet site [3]. Information contained in financial statements can be used for numerous purposes. For example, other business entities can use them in the process of making business, financial, investment and other decisions. Likewise, banks and financial institutions can use them in order to approve loans or assess investment risks related to the certain business entity. However, financial information contained in financial statements are not processed and represent a raw data that should be analyzed in order to assess the performance of a certain business entity. Aside Notes to financial statements, as one of the qualitative statements that business entities prepare and report, all other statements are quantitative in nature and offer hundreds of pieces of data. Therefore, it is of great importance to perform certain type of analysis on the collected data in order to gain a solid basis for business decision making process. Analysis of financial statements is one of the most common methods of assessing business performance. The main goal of conducting the analysis of financial statements is to obtain information on the performance of the observed company, i.e. liquidity, profitability and solvency. Measuring financial performance using compiled and disclosed financial statements is a quantitative analysis of the position of the observed company, including the way in which the company uses the capital invested in business. High quality analysis of the performance of the observed entity provides a comprehensive image of the business, including meeting the information needs of stakeholders. The authors [4] point out in their paper that the analysis of financial performance is crucial in determining the efficiency in terms of the use of available resources. Likewise, an entity owners will be able to assess management skills and decisions that have been made in previous, as well as in current reporting period, so that they could analyze entities strengths, weaknesses and therefore improve their overall performance [5, 6, 7].
Some pieces of data disclosed in financial statements have informational power to be used on their own, such as Total assets, Sales revenue, or Net result. However, informational power of data increases when they are put into relation with other pieces of data. Therefore, financial statements analysis using ratios has been one of the most commonly used methods of assessing business performance. Financial ratio is a relative magnitude of two (or more) selected numerical values taken from financial statements. For example, relation between Net result and Equity will provide information on how much dollars of profit an entity earns for each dollar invested in equity. Results of financial statements analysis can be used to compare performance of a certain entity over a period of time, or for comparison with other entities within the industry. However, since financial statements analysis takes time and there are numerous financial ratios that analysts could use (and the fact that most of these ratios are correlated), the number of ratios that are being calculated and assessed should be reduced so that an analyst could focus on several of them without losing data that could be relevant for the analysis [8]. One of the methods that can be used is Principal Component Analysis (PCA), which reduces number of observed variables for any further, regression, or any other type of analysis [9]. PCA analysis has found its numerous purposes in different industries, for example, in image compressing [9, 10, 11], as well as in biometrics or “bioimaging” where physical characteristics of a person are used for its identification with application on communication devices and security systems.
The significance of PCA results is reflected in the fact that they can be used for more effective and efficient analysis of performance of certain entity, or for all business entities within a certain industry, or if analyzed financial data is related to whole economy, than results could be used for the analysis of all entities within it. The main advantages of PCA are precision of results; reduction of time needed for the analysis and evaluation of results; as well as reduction of related costs and efforts of the analyst.
With the development of technology, we have gained the ability to generate massive amounts of data. The use of correct methodologies for data analysis has become essential when dealing with complex financial challenges. In this paper, we discuss the theory underlying PCA. This type of analysis is one of the most used statistical tools in the field of financial data analysis. To ensure that the proper method is used for the analysis, theoretical knowledge and an comprehension of statistical methods are essential.
PCA is primarily designed as a statistical technique that selectively reduces the dimensionality of data in complex data sets while preserving maximum variance. Since research in the financial sector involves both a large amount of data and a large number of variables simultaneously, it is difficult for us to perform analysis for this type of data.
Visualization techniques are only useful in two or three dimensional spaces, and single-variable analysis does not provide precise results due to overlapping variance. To achieve dimensionality reduction, it is necessary to generate principal components, i.e., a new set of variables containing a linear combination of the original variables. PCA can be used for a variety of tasks. A very small number of components are sufficient to cope with the variability of a data set. Since the number of components is reduced by using principal components, the complexity of the analysis itself is also reduced by avoiding analyzing a large number of output variables.
The standard PCA procedure takes as its starting point a data set in which
This equation is valid even when the eigenvectors are multiplied by −1. Here,
The
For the final outcome of the PCA assessment to be successful and significant, numerous conditions must be met. Initially, it is crucial that the data entered are uninterrupted and that variables should be measured on an interval or ratio scale. This condition must be met because PCA tests important correlation patterns for these variables.
Another crucial requirement is that the relationships between the individual pairs of variables are linear. If there are nonlinear relationships between the individual pairs of variables, appropriate data transformation techniques, such as logarithmic transformations, should be considered. Presumptions for PCA are filling missing values with not null values, outliers handling, and normalization scaling. All outliers should be filtered out prior to analysis, as they can bias the results by affecting the magnitude of the correlation.
To obtain more accurate estimates for the correlation population parameters, a large sample size is required. The data sets must be linear in order to be formed. The basic principle of PCA is that high variance must be taken into account, while variables with lower variance can be considered noise and are not taken into account. All variables must be processed at the same level of measurement.
Eq. (2) associates the eigenvalue decomposition of the covariance matrix
Where
Here
Here
The variability associated with the set of retained principal components can be used to ensure the quality of any
The trace of
It is a common approach to use a pre-specified percentage of the total variance to determine how many principal components to keep, but graphical constraints often lead to keeping only the first two or three principal components. The percentage of total variance is a basic tool for measuring the quality of these low-dimensional graphical representations of the data set.
The biggest problem is the number of components needed to obtain a sufficient number of variances while achieving a reduction in dimensionality. There are several ways to determine the components, and one of them is to set a threshold.
The next very popular approach is the “Scree Plot” [14], where the components are arranged on the
The most popular method is parallel analysis [15], where PCA is performed with as many variables as the original data set includes. The average eigenvalues between the original data set and the simulated data set are measured. Any values from the original data that are lower than the data in the simulated set are discarded.
PCA has many advantages. In terms of maximizing variance in
Factor analysis is a method that is often combined with PCA and it inspires the concept of rotating principal components [16]. Assume that
Another method of simplifying the principal components is to limit the charges of the new variables. This is called adding a constraint. There are several variants of this strategy, one of which uses LASSO linear regression [17], that represents least absolute shrinkage and selection operator. In this approach, SCoTLASS components are discovered, solving the same optimization problem as PCA, but with the additional constraint
PCA is inherently sensitive to the occurrence of outliers and thus to large errors in data sets [19]. As a result, efforts have been made to define robust variants of PCA, and the terminology RPCA has been used to refer to several approaches to this problem. Huber’s early work focused on robust alternatives to covariance or correlation matrices and how they could be used to generate robust principal components [20]. The demand for methods to process very large data sets sparked renewed interest in robust PCA variants. This led to PCA research lines, especially in areas such as machine learning, image processing, web data analysis, and many others.
Wright et al. [21] defined RPCA as the sum of two
where
PCA was first introduced into mechanics by [22], as an analogue of the axis theorem. It was later named “PCA” by [23]. The range of applications in finance and economics is extensive. Take as an example [24], who used PCA to document three factor structures. Stock and Watson [25] used PCA to monitor economic development and activity, as well as the inflation index. Egloff et al. [26] used PCA as a way to analyze the dimensions of inconsistent dynamics. Volatility is a statistical measure that can be used to determine these inconsistencies using a two-factor volatility model. This includes long-term and short-term fluctuations in the volatility structure. Baker and Wurgler [27] used PCA to measure investors sentiment, i.e., their positive or negative view. This was done according to the principle of the number of sentiment proxies before Baker, [28] created the policy uncertainty index. This index represents potential risks in the near future.
The most important item in the construction of PCA is the estimation of the eigenvalues of the covariance matrix sample. Anderson and Weeks [29] and Anderson [30] showed that sample eigenvalues were consistent when dealing with asymptomatic sentiment proxy results. Waternaux [31] proved that similar results are obtained with simple eigenvalues as long as there is a fourth moment in the data. In addition to the discussions in the [32] book, [33] was able to establish the asymptotic distribution of eigenvectors using generalized assumptions.
However, this PCA approach to eigenvalues has some downsides. The first problem is certainly dimensionality, which can be noticed when the cross sectional dimension grows simultaneously with the sample in the same period. Then inconsistencies occur. Another problem arises from linear data types that do not include nonlinear patterns. A third problem [34] arises from the dependence of the asymptotic theory on fixed assumptions for the analysis. For these reasons, we have a problem when we use PCA for reimbursement data. Most of the time, we need years of data to make an assumption, which in turn leads to other problems, such as permanence and consistency of non-fixed parameters. This type of data has backlogs and volatility times often vary.
These problems stimulate the improvement in this field and motivate the development of tools for PCA methods. The approach to the problem, where the number of occurances grows in fixed time periods, touches all the listed downsides. Theoretically, it is known that as the frequency of the sample increases, the estimated variance and covariance increase. This is true until the microstructure of the market begins to take effect. Incidentally, this is not a serious problem if we choose a sampling frequency of minutes, which we use as opposed to the below one second time interval most often used for liquid stocks. A high frequency asymptotic analysis with the cross-sectional dimension is expected as the time interval increases sharply. This high frequency asymptotic framework allows us to perform non-parametric analysis as well as independent, non-static and analysis without underlying parameters as is the case with low frequency processes.
Asymptotic theory is very common in many contexts. Jacod et al. [13] and Jacod and Podolskij [35] also dealt with one problem that we deal with in this paper, where the cross sectional dimensions are invariant and the process is continuous. Mykland and Zhang [36] designed an alternative theory to the one put forward by [37], that discuss inference for volatility function dependence. It is based on the aggregation of local estimates and uses a finite number of blocks. Saha et al. [38] considered the expected values of the integrated covariance matrix under conditions where there is an error measure and the matrix is large containing high frequency data. Tao et al. [39] addressed work on the convergence rate. Jacod and Rosenbaum [40] analyzed estimators, composed of aggregating functions of estimates. They did so using integrated quarticity estimation. Heinrich and Podolskij [41] discussed empirical covariate matrices of Brownian integrals. Here is discussed the measurement of the leverage effect and its evaluation by the integrated correlation method [42].
PCA analysis can be used in analysis of financial data for different purposes. For example [43] used it to identify the type of impact on grouped impact factors, such as assessing the quality of accounting information and facilitating the process of financial analysis conducted by different users. On the other hand, [44] used PCA to assess the impact of the evolution of Finnish standards on IFRS (International Financial Reporting Standards). Finally [45] used PCA analysis to determine the macroeconomic impact on the profitability of Romanian listed companies, using data from 1997 to 2007, and identified following indicators: liquidity, solvency, and firm’s dimension.
When it comes to the use of PCA analysis in financial statements analysis, four papers that focus on Romanian listed companies will be reviewed first. All papers emphasize the importance of using PCA analysis in the analysis of key financial ratios. In the first paper author [46] analyzed the data of 16 initial variables which he grouped into 3 new variables (general efficiency indicator, indicator in correlation with historical debts of companies and development indicator (given long-term debt and deferred income). Those three variables where able to explain 96.72% of initial variability. In the second paper, [47] analyzed data for 2010 including initially seven indicators of standard financial analysis and they reduced them to only two (which explain 94% of initial variability). In third paper, [48] used data from the stock exchange in the period 2006–2011 to identify the main components of financial statements which explain 79.08% of initial variability. The same group of indicators has been used by [43] on research sample that consisted of 111 companies from Madrid stock exchange and 32 companies from Eurostoxx50 for reporting periods 2005–2007. Research results showed that those six indicators explained 87% of total variance, with the first two indicators at app 44% of total variance.
In order to provide an answer on defined research question, 3.013 medium and large business entities were selected by random and used as a research sample. Financial statements for 2019 reporting period have been downloaded manually from the official website of the Business Registers Agency (BRA). BRA is a state administrative body that collects financial statements and corresponding audit reports of business entities that operate within the territory of the Republic of Serbia. Information published by BRA is used for financial analysis of business entities and as a basis of decision-making process. Afterwards, data from the pdf files containing financial statements have been copied and recorded in pre-set up tables in Excel files. Namely, medium and large business entities in the Republic of Serbia have an obligation to prepare and disclose full set of financial statements, consisting of balance sheet, income statement, cash-flow statement, statement of changes in equity and notes to financial statements. Since all previously mentioned statement, except notes to financial statements, are quantitative in nature, they were used for this research. Values originally disclosed in RSD, as the reporting currency, were converted into euros by using the average exchange rate of euros on the balance sheet date (31st December). Values of each financial statement line is presented in thousands, and therefore they are presented as such in this research [49].
Financial statement item lines in official financial statements are marked by corresponding automatic data processing number (in Serbian: Automatska obrada podataka—AOP), that belongs to the national nomenclature system. These markings are used in order to perform control of mathematical calculations before each financial statement is accepted for publishing by BRA. They also serve as an instrument of connecting data and information regarding the same financial statement item presented in financial statements. Balance sheet items cover automatic data processing numbers from 0001 to 0465; income statement from 1001 to 1071; statement of cash-flows from 3001 to 3047; and statement of changes in equity from 4001 to 4252. Table 1 shows the formulas used for the calculation of the selected financial indicators that will be used in this research. Having in mind that these variables will be used in order to differentiate business entities to three major types of business activities, these variables have been selected by a common sense.
Variables | Derived from |
---|---|
Fixed assets in total assets | AOP2/AOP71 |
Percent sales of merchandise in total operating revenue | AOP1002/AOP1001 |
Percent sales of products and services in total operating revenue | AOP1009/AOP1018 |
Percent cost of merchandise sold in total operating expenses | AOP1019/AOP1018 |
Percent cost of material in total operating expenses | AOP1023/AOP1018 |
Percent fuel and energy cost in total operating expenses | AOP1024/AOP1018 |
Percent wage cost in total operating expenses | AOP1025/AOP1018 |
Percent productive service cost in total operating expenses | AOP1026/AOP1018 |
Percent depreciation cost in total operating expenses | AOP1027/AOP1018 |
Percent raw material in total assets | AOP45/AOP71 |
Percent WIP in total assets | AOP46/AOP71 |
Percent finished products in total assets | AOP47/AOP71 |
Percent WIP and finished products in total assets | (AOP46 + AOP47)/AOP71 |
Percent merchandise in total assets | AOP48/AOP71 |
Calculation of selected financial indicators.
Data preparation is a key process in data analysis. The basic preparation and cleaning procedures are:
Preparing a copy of the table
Adding new attributes
Conversion of column types
General data cleaning and adjustment
Specifically, the cleaning includes the following items:
Editing date variables—the most common formatting problems
Recoding of zeros/missing values
Decoding categorical variables using labels and hot encoding
Arranging outliers
Application of normalization/standardization/ log transformation
Calculating descriptive statistics—mean, median, mode, standard deviation, variance, rank, etc.
Calculating inferential statistics - distributions, t-value, p-value, frequencies, cross-tabulations, correlation, covariance, etc.
More advanced techniques include:
Coding:
Categorical variables are labeled as character variables and must be converted to a factor type for modeling purposes. Queues perform this task.
Outliers:
For numeric variables, we can identify deviations numerically by the value of the bias.
Normalization/logarithmic transformation:
One of the techniques to normalize the biased distribution is logarithmic transformation. First, a new variable is created, while later the value of the bias of this new variable is calculated and printed.
Standardization:
One of the standardization techniques is that all characteristics are centered around zero and have approximately the variance of one unit. Scaling is used so that the variable is converted. The result is that these variables are standardized with a mean of zero.
As part of the preparation for PCA, firstly missing values from the dataset were filled with zeros. After that, the data was scaled by using a standard scaler, which standardizes features by removing the mean and scaling to unit variance. The preprocessed dataset, was then used for:
PCA
Sparse PCA
Robust PCA
All three of the PCA methods were instanciated with the number of components set to 7. After PCA, the now transformed data went through several clustering methods for the purpose of comparing results. The clustering methods that were used for each PCA are:
K-means clustering
Agglomerative clustering
BIRCH clustering
Gaussian Mixture
Spectral clustering
Furthermore, each of the clustering methods were executed with just the preprocessed data, without PCA, also for the purpose of comparing results.
Data preparation:
Compute dot product matrix:
Eigenanalysis:
Compute eigenvectors:
Keep first 7 components:
Compute 7 features:
end procedure.
This chapter discusses the outcomes of PCA and cluster analysis. The initial variables that load on the principal components are studied. Correlations or covariances between the original variables and the principal components correlate with the loadings. The variable loadings are contained in a loading matrix, which is created by multiplying the eigenvector matrix by a diagonal matrix containing the square root of each eigenvalue. The entries are determined by the component extraction method used. Non-standardized loadings show the covariance between mean-centered variables and standardized component values, regardless of whether the extraction is based on the singular value decomposition of the matrix or the eigenvalue decomposition of the covariance matrix.
The eigenvalue decomposition of the correlation matrix results in the standardized charges. The correlations between the original variables and the component scores are represented by these loadings. Because they always vary between −1 and 1 and are independent of the scale used, standardized charges are easy to read. In most cases, a threshold is set and only variables with loadings above this threshold are examined.
The total variance presents sum of variances of principal components. The ratio between the variance of principal component and the total variance is the fraction of variance explained by a principal component.
Figure 1 shows total variance explained by using three methods of PCA. The steepest increase belongs to the PCA line, which cumulative explained variance is app. 87%. This line is almost parallel to the line from Sparse PCA which cumulative explained variance is 83%. However, when it comes to Robust PCA line it has been noticed that cumulative explained variance is only app. 26% and the increase of values is minimal.
Total variance explained.
PCA: The highest fraction of explained variance among these variables is 32%, and the lowest one is 5%. Cumulative explained variance is 86% (see Table 2).
Factors | Total | % of variance | Cumulative % |
---|---|---|---|
Factor 0 | 4.491515 | 32.082248 | 32.082248 |
Factor 1 | 2.540717 | 18.147978 | 50.230226 |
Factor 2 | 1.269778 | 9.069843 | 59.300069 |
Factor 3 | 1.243867 | 8.884762 | 68.184831 |
Factor 4 | 0.961330 | 6.866641 | 75.051473 |
Factor 5 | 0.867145 | 6.193891 | 81.245364 |
Factor 6 | 0.760536 | 5.432398 | 86.677761 |
PCA total variance explained.
Sparse PCA: The highest fraction of explained variance among these variables is 21%, and the lowest one is 5%. For instance, variables together explain 83% of the total variance (see Table 3).
Factors | Total | % of variance | Cumulative % |
---|---|---|---|
Factor 0 | 3.078591 | 21.989939 | 21.989939 |
Factor 1 | 2.186255 | 15.616108 | 37.606047 |
Factor 2 | 1.698036 | 12.128828 | 49.734874 |
Factor 3 | 1.757003 | 12.550022 | 62.284897 |
Factor 4 | 1.047037 | 7.478832 | 69.763729 |
Factor 5 | 1.062211 | 7.587224 | 77.350953 |
Factor 6 | 0.809469 | 5.781923 | 83.132875 |
Sparse PCA total variance explained.
Robust PCA: The highest fraction of explained variance among these variables is 21%, and the lowest one is 0%. For instance, variables together explain 25% of the total variance (see Table 4).
Factors | Total | % of variance | Cumulative % |
---|---|---|---|
Factor 0 | 3.035926 | 21.685184 | 21.685184 |
Factor 1 | 0.454951 | 3.249650 | 24.934834 |
Factor 2 | 0.108168 | 0.772628 | 25.707462 |
Factor 3 | 0.020284 | 0.144884 | 25.852346 |
Factor 4 | 0.006630 | 0.047355 | 25.899701 |
Factor 5 | 0.000018 | 0.000128 | 25.899829 |
Factor 6 | 0.000000 | 0.000000 | 25.899829 |
Robust PCA total variance explained.
PCA is the best approach for this kind of data, regarding number of features.
The amount of variance in each variable considered is represented by the communalities. The variance in each variable explained by all components or factors is estimated using the initial communalities.
The percent fuel and energy cost in total operating expenses is given here with 88% variance. The percent productive service cost in total operating expenses is given here with 75% variance. The percent finished products in total assets here is 75% of the estimated variance (see Table 5).
Columns | Communality |
---|---|
Percent merchandise in total assets | 0.159427 |
Percent sales of merchandise in total operating revenue | 0.222216 |
Percent cost of merchandise sold in total operating expenses | 0.224299 |
Percent sales of products and services in total operating revenue | 0.236318 |
Fixed assets in total assets | 0.347415 |
Percent cost of material in total operating expenses | 0.411423 |
Percent raw material in total assets | 0.426201 |
Percent WIP and finished products in total assets | 0.449704 |
Percent depreciation cost in total operating expenses | 0.683213 |
Percent wage cost in total operating expenses | 0.729997 |
Percent WIP in total assets | 0.731771 |
Percent finished products in total assets | 0.745349 |
Percent productive service cost in total operating expenses | 0.752027 |
Percent fuel and energy cost in total operating expenses | 0.880639 |
PCA communalities.
The percent fuel and energy cost in total operating expenses here is 91% variance. The percent finished products in total assets here is 80% of the estimated variance. The percent productive service cost in total operating expenses here is 74% variance (see Table 6).
Columns | Communality |
---|---|
Percent merchandise in total assets | 0.191833 |
Percent sales of products and services in total operating revenue | 0.227810 |
Percent sales of merchandise in total operating revenue | 0.260545 |
Percent cost of merchandise sold in total operating expenses | 0.263888 |
Fixed assets in total assets | 0.354743 |
Percent cost of material in total operating expenses | 0.407825 |
Percent raw material in total assets | 0.417451 |
Percent WIP and finished products in total assets | 0.451553 |
Percent depreciation cost in total operating expenses | 0.555661 |
Percent wage cost in total operating expenses | 0.695148 |
Percent WIP in total assets | 0.719447 |
Percent productive service cost in total operating expenses | 0.742714 |
Percent finished products in total assets | 0.800108 |
Percent fuel and energy cost in total operating expenses | 0.911274 |
Sparse PCA communalities.
The percent wage cost in total operating expenses here is 82% variance. The percent sales of merchandise in total operating revenue here is 79% of the estimated variance. The percent cost of merchandise sold in total operating expenses here is 74% variance (see Table 7).
Columns | Communality |
---|---|
Percent WIP in total assets | 0.200472 |
Percent merchandise in total assets | 0.317793 |
Percent finished products in total assets | 0.333984 |
Percent depreciation cost in total operating expenses | 0.345393 |
Percent fuel and energy cost in total operating expenses | 0.349862 |
Percent sales of products and services in total operating revenue | 0.365996 |
Percent raw material in total assets | 0.433737 |
Percent WIP and finished products in total assets | 0.444081 |
Percent cost of material in total operating expenses | 0.519423 |
Fixed assets in total assets | 0.651365 |
Percent productive service cost in total operating expenses | 0.680299 |
Percent cost of merchandise sold in total operating expenses | 0.745842 |
Percent sales of merchandise in total operating revenue | 0.789024 |
Percent wage cost in total operating expenses | 0.822730 |
Robust PCA communalities.
Figure 2 presents the amount of variance for each considered variable represented by the communalities. From the aspect of PCA and Sparse PCA it can be noticed that variable Percent fuel and energy cost in total operating expenses and variable Percent finished products in total assets have significant estimated variance. When it comes to Robust PCA, variance of 82% refers to the variable Percent wage cost in total operating expenses. From the economic point of view first two variables could be used to distinguish type of three major business activities. Mainly, the amount of fuel and energy cost will differ between business activities. It is expected that production entities will have higher values of fuel and energy costs because plant, machinery and equipment will require energy to operate. Also, merchandise entities will probably have higher values of fuel and energy costs compared to other services having in mind fuel spent for transportation of merchandise and energy needed for operation of their facilities. Second variable Percent finished products in total assets is also expected to be used for differentiation since only production entities will have this balance sheet line in their financial statements. Main surprise might be third variable Percent wage cost in total operating expenses, since most entities have very similar share of total wage costs in total operating expenses. Namely, although official state records showed that average wages differ across industries, management of companies usually plan operating expenses and their structure.
Amount of variance represented by the communalities.
The best approach for the PCA/Clustering combination regarding high level of Silhouette Index and Cluster Sizes are: K-means/Robust PCA and Spectral/Robust PCA. The Davies Bouldin Index implies that a smaller value gives better clustering. This produces the idea that no cluster has to be similar to another, and that object inside clusters are very uniformly distributed (see Table 8).
Clustering/PCA method | Cluster sizes | Silhouette index | Davies bouldin index |
---|---|---|---|
K-means/No PCA | (1345, 932, 733) | 0.30208710358306756 | 1.5444364169813884 |
K-means/PCA | (1353, 934, 723) | 0.3637346841903855 | 1.3405097768944103 |
K-means/Sparse PCA | (1356, 939, 715) | 0.36307616530243575 | 1.3418713066940657 |
K-means/Robust PCA | (1209, 944, 857) | 0.5193200382282146 | 0.7834359567299072 |
Agglomerative/no PCA | (1151, 935, 924) | 0.27839422485839554 | 1.7150687814273013 |
Agglomerative/ PCA | (1225, 962, 823) | 0.31642069773357084 | 1.4995739243069988 |
Agglomerative/sparse PCA | (1888, 893, 229) | 0.31642069773357084 | 1.4995739243069988 |
Agglomerative/robust PCA | (1311, 878, 821) | 0.4593880561940543 | 0.9274868826361716 |
Birch/no PCA | (1151, 935, 924) | 0.27839422485839554 | 1.7150687814273013 |
Birch/ PCA | (1225, 962, 823) | 0.31642069773357084 | 1.4995739243069988 |
Birch/sparse PCA | (1225, 962, 823) | 0.31642069773357084 | 1.4995739243069988 |
Birch/robust PCA | (1317, 867, 826) | 0.45631070311567473 | 0.9348852316431389 |
Gaussian mixture/no PCA | (1336, 992, 682) | 0.17495781525891207 | 2.1078218204567496 |
Gaussian mixture/ PCA | (1161, 1155, 694) | 0.2539355374019169 | 1.6227017939395394 |
Gaussian mixture/sparse PCA | (1161, 1155, 694) | 0.2539355374019169 | 1.6227017939395394 |
Gaussian mixture/robust PCA | (1467,784, 759) | 0.28455634384131373 | 1.1919962215015028 |
Spectral/no PCA | (2994, 8, 8) | 0.460433642421337 | 0.9718901349784725 |
Spectral/PCA | (3001, 7, 2) | 0.5399338738262545 | 0.6856986473871954 |
Spectral/sparse PCA | (3001, 7, 2) | 0.5399338738262545 | 0.6856986473871954 |
Spectral/robust PCA | (1346, 920, 744) | 0.5146721760042233 | 0.7917964357887189 |
PCA with different clustering methods.
Columns/factors | Factor 0 | Factor 1 | Factor 2 | Factor 3 | Factor 4 | Factor 5 | Factor 6 |
---|---|---|---|---|---|---|---|
Fixed assets in total assets | 0.178413 | −0.326641 | 0.415221 | −0.102354 | −0.025277 | −0.072754 | −0.141675 |
Percent sales of merchandise in total operating revenue | −0.436002 | 0.152729 | 0.080029 | −0.025182 | 0.028728 | 0.016652 | −0.025519 |
Percent sales of products and services in total operating revenue | 0.398117 | 0.022315 | −0.270570 | −0.046006 | 0.031509 | 0.012930 | −0.028959 |
Percent cost of merchandise sold in total operating expenses | −0.432559 | 0.162995 | 0.080296 | −0.035352 | 0.022542 | 0.026778 | −0.041260 |
Percent cost of material in total operating expenses | 0.269688 | 0.303749 | −0.078000 | −0.386050 | −0.243323 | −0.066637 | −0.166323 |
Percent fuel and energy cost in total operating expenses | 0.150958 | −0.217356 | 0.283494 | −0.008988 | 0.096350 | 0.822637 | −0.210100 |
Percent wage cost in total operating expenses | 0.210317 | −0.224488 | −0.145697 | 0.058149 | 0.719422 | −0.304476 | −0.022063 |
Percent productive service cost in total operating expenses | 0.137457 | −0.048360 | −0.397081 | 0.585499 | −0.374661 | 0.172006 | 0.245674 |
Percent depreciation cost in total operating expenses | 0.095815 | −0.269993 | 0.484683 | 0.000289 | −0.400868 | −0.359862 | 0.275725 |
Percent raw material in total assets | 0.190490 | 0.245296 | −0.165694 | −0.526444 | −0.137683 | 0.071830 | 0.032101 |
Percent WIP in total assets | 0.158335 | 0.359273 | 0.200936 | 0.383609 | −0.059087 | −0.175372 | −0.596528 |
Percent finished products in total assets | 0.174390 | 0.375283 | 0.278149 | 0.015943 | 0.252221 | 0.151402 | 0.640266 |
Percent WIP and finished products in total assets | 0.214830 | 0.474174 | 0.309621 | 0.255892 | 0.126328 | −0.013709 | 0.034896 |
Percent merchandise in total assets | −0.355975 | 0.151166 | −0.014079 | −0.013559 | 0.088827 | 0.039431 | 0.005508 |
PCA component matrix.
Columns/factors | Factor 0 | Factor 1 | Factor 2 | Factor 3 | Factor 4 | Factor 5 | Factor 6 |
---|---|---|---|---|---|---|---|
Fixed assets in total assets | 0.000000 | −0.020910 | −0.504987 | 0.000000 | −0.254639 | −0.185601 | −0.002365 |
Percent sales of merchandise in total operating revenue | 0.435472 | 0.000000 | 0.246576 | −0.085566 | 0.000000 | 0.052803 | 0.000000 |
Percent sales of products and services in total operating revenue | −0.433624 | 0.008108 | 0.000000 | 0.199284 | 0.000000 | 0.000000 | 0.000000 |
Percent cost of merchandise sold in total operating expenses | 0.438993 | 0.000000 | 0.254341 | −0.067395 | 0.000000 | 0.044065 | 0.000000 |
Percent cost of material in total operating expenses | −0.027509 | 0.085834 | 0.000000 | 0.630267 | 0.000000 | 0.045436 | −0.019978 |
Percent fuel and energy cost in total operating expenses | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | −0.954607 | 0.000000 |
Percent wage cost in total operating expenses | −0.453726 | 0.000000 | 0.000000 | −0.325539 | −0.594326 | 0.173439 | 0.000000 |
Percent productive service cost in total operating expenses | −0.333679 | 0.000000 | 0.000000 | −0.222344 | 0.762847 | 0.000000 | 0.000000 |
Percent depreciation cost in total operating expenses | 0.108694 | 0.000000 | −0.726249 | 0.000000 | 0.000000 | 0.128099 | 0.000000 |
Percent raw material in total assets | 0.000000 | −0.007293 | 0.083372 | 0.624407 | −0.000201 | 0.000000 | 0.143399 |
Percent WIP in total assets | 0.000000 | 0.460374 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | −0.712393 |
Percent finished products in total assets | 0.000000 | 0.573218 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.686680 |
Percent WIP and finished products in total assets | 0.000000 | 0.671977 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 |
Percent merchandise in total assets | 0.315974 | 0.000000 | 0.291738 | −0.076742 | 0.000000 | 0.031515 | 0.000000 |
Sparse PCA component matrix.
Columns/factors | Factor 0 | Factor 1 | Factor 2 | Factor 3 | Factor 4 | Factor 5 | Factor 6 |
---|---|---|---|---|---|---|---|
Fixed assets in total assets | −0.173467 | 0.275000 | 0.507855 | −0.499215 | 0.156525 | −0.088965 | 0.078114 |
Percent sales of merchandise in total operating revenue | 0.525938 | −0.128407 | 0.122190 | −0.093645 | −0.109748 | −0.078270 | 0.673835 |
Percent sales of products and services in total operating revenue | −0.444479 | −0.119035 | −0.307493 | −0.162452 | −0.114015 | −0.009416 | −0.142249 |
Percent cost of merchandise sold in total operating expenses | 0.510523 | −0.126489 | 0.118665 | −0.111772 | −0.087492 | 0.088045 | −0.653626 |
Percent cost of material in total operating expenses | −0.204519 | −0.558377 | 0.030438 | −0.282440 | −0.265091 | 0.084341 | 0.087885 |
Percent fuel and energy cost in total operating expenses | −0.119620 | 0.103472 | 0.453140 | 0.056594 | −0.245465 | 0.200560 | −0.125820 |
Percent wage cost in total operating expenses | −0.204794 | 0.179552 | 0.159958 | 0.368300 | −0.273464 | −0.715834 | −0.010912 |
Percent productive service cost in total operating expenses | −0.131802 | 0.032733 | 0.012123 | 0.533088 | −0.234838 | 0.537258 | 0.183658 |
Percent depreciation cost in total operating expenses | −0.098392 | 0.135731 | 0.478665 | 0.038015 | −0.137017 | 0.259630 | −0.023300 |
Percent raw material in total assets | −0.120240 | −0.430495 | 0.139923 | −0.141176 | −0.424059 | −0.117921 | 0.026698 |
Percent WIP in total assets | −0.048543 | −0.251299 | 0.164302 | 0.160983 | 0.282957 | −0.044589 | −0.000473 |
Percent finished products in total assets | −0.062609 | −0.324119 | 0.211913 | 0.207631 | 0.364950 | −0.057519 | 0.022279 |
Percent WIP and finished products in total assets | −0.071814 | −0.371772 | 0.243069 | 0.238158 | 0.418607 | −0.065970 | −0.072968 |
Percent merchandise in total assets | 0.289968 | −0.108389 | 0.082710 | 0.230665 | −0.308640 | −0.196863 | −0.167039 |
Robust PCA component matrix.
This chapter was focused on the use of Principle component analysis in financial data science. Research has been conducted that included 3013 medium and large business entities and their financial statements from 2019 reporting period. PCA has been used in order to differentiate between the three major types of business activities - merchandising, manufacturing, and service. Therefore, 14 financial ratios have been selected by common sense and further analyzed according to their significance in dimensionality reduction. Results of clustering gave 7 new variables: 1. cost of merchandise sold in total operating expenses, and cost of material in total operating expenses; 2. fuel and energy cost in total operating expenses, and sales of product and services in total operating revenue; 3. wage costs in total operating expenses, and sales on merchandise in total operating revenue; 4. productive service cost in total operating expanses, and fixed assets in total assets; 5. depreciation cost in total operating expenses, and merchandise in total assets; 6. raw material in total assets, and WIP and finished products in total assets; 7. finished products in total assets, and WIP in total assets. These groups of variables were able to explain 86.7% of initial variability. Compared to the results of authors previously mentioned in literature review, it can be concluded that percentage is within the range of reached results. When it comes to initial communalities which estimated the variance in each variable, three financial ratios that had the highest percentage were: fuel and energy cost in total operating expenses (original PCA—88%, sparse PCA—91%); productive service cost in total operating expenses (original PCA—75%, sparse PCA—74%); and finished products in total assets (original PCA 75%, sparse PCA—80%). Although these ratios showed the best results, it has to be mentioned that there is a correlation between all of financial ratios used in analysis and therefore results would be different when ratios are used.
We would like to express our gratitude to Prof. Nemanja Stanišić, Ph.D. from the Singidunum University for supporting this research through valuable suggestions, and assignment of a research database.
Authors declare no conflict of interest.
Author Stefana Janićijević contributed to the design and implementation of the research and analysis of the results. Authors Vule Mizdraković and Maja Kljajić prepared sections of the chapter that refers to the financial data science and financial reporting: introduction, related work, research methodology and analysis of discussion and result. All authors provided critical feedback and helped shape the research, analysis, and manuscript.
m | number of numerical variables |
n | individuals |
x | vector |
X | data matrix |
j | number of columns |
Xc | linear combinations |
c | vector of constants |
M | covariance matrix |
λ | lagrange multiplier |
U | matrix with orthonormal colums—eigenvectors |
A | matrix with singular vectors |
L | diagonal elements of the matrix |
L2 | diagnal matrix with one square of the singular values |
r | rank of the matrix |
q | dimensional subspace |
tr | trace of matrix |
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