Abstract:
Investment decisions include higher level of risk due to the uncertainty nature in the business
environment. Thus, investors take investment decisions more wisely by considering several
internal and external factors. As a result, this study is mainly focusing on the profitable
industries in a developed country like United Kingdom and it has considered analysing for the
top 10 companies listed in the share market. Further, it investigates how changes in the
financial performance of those selected companies influencing the profit of first 10 best. Thus,
Multinational National Companies (MNC) in the UK during the period of 2005 to 2019 was
selected as the sample of this study. Accordingly, eight performance indicators were used to
carry out this study as current ratio, Quick ratio, Debt to equity ratio, Return on Asset ratio,
earning per share ratio, Return on Investment ratio, Return on Equity ratio and number of
employees. Moreover, secondary data was collected through annual financial statements of
the organizations. In this research Principal Component Analysis (PCA) tools have been used
to analysis and discuss the profitability of performance indicators of the selected MNC. As per
the analysed data, principal component analysis was run to come up with variables from each
component. However, all the variables involved in this analysis are not recorded within the
expected range as some showed higher level of deviations. Accordingly, this study
demonstrates the position of the MNCs in the UK to different stakeholders who are interested
in the financial performance of each company by giving them a quick analyse to show the
performance of each company. It also assists those who do financial reporting on picking the
ratios which matter in reflecting the performance of their companies. The use of PCA gives
unbiased ratios that are most significant to assess the performance financially. As a result, this
study will be beneficial for the future investors in financial market to select the best MNC to
make them invest decisions based on the financial performances of the organizations.
Moreover, this study suggests future research to use other alternative multivariate methods to
reduce the complexity of the obtained model.
Citation:
Ponnudurai, T. (2021). Profitability analysis of selected multinational companies listed on London stock exchange by principal component method [Master's theses, University of Moratuwa]. Institutional Repository University of Moratuwa.http://dl.lib.uom.lk/handle/123/22496