**4.2 Communalities**

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**).

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**).


#### **Table 5.**

*PCA communalities.*



#### **Table 6.**

*Sparse PCA communalities.*


#### **Table 7.**

*Robust 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**).

**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

**Figure 2.** *Amount of variance represented by the communalities.*

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.
