Advantages and disadvantages of financial factor analysis method

Advantages and disadvantages of financial factor analysis include:

1, Advantages: Factor analysis is an objective and scientific mathematical reasoning method, which can simplify the research of financial work, find the main hidden factors and compare the research results with each other.

2. Disadvantages: in the factor analysis operation procedure, there are multiple choices in several main operation links, and it is still unable to get rid of subjective judgment and is not rigorous enough; In different studies, factor analysis often can't get the same factor; Factor analysis assumes that there should be a linear relationship between variables, and the factors are combined in an additive way, which cannot present complex phenomena.