Indicators of The Organization’s Financial Situation Assessment Using the Factor Analysis

Abstract

this study aims to determine the financial ratios used to demonstrate the real financial situation of the organization through an empirical study of a sample of US industrial companies during the period 2011-2017. In this study, we used both types of the factor analysis; the exploratory analysis to extract and label factors to be relied upon in assessing the company’s financial situation, then the confirmatory analysis to confirm the exploratory analysis results through the tests provided by the analyses. The main findings of the study, according to the sample of the study, the financial situation assessment is done through four sets: indebtedness, liquidity, profitability and efficiency, by identifying the level of dependence on external sources in funding, and the efficiency in using these sources for costs control and generating profits with well thought out liquidity ratios.