Combining Fuzzy AHP and Fuzzy TOPSIS with Financial Ratios to Design a Novel Performance Evaluation Model

Abstract

Financial performance evaluation is a very crucial process for industries in current highly competitive environment. Therefore, designing an accurate and appropriate performance evaluation framework is beneficial for insiders and also shareholders of a company. To evaluate financial performance, we need to consider some financial indicators that reflect the competitiveness of a company. There are many financial indicators and criteria that are vague and can be regarded as a fuzzy multiple criteria decision-making (MCDM) problem. In this paper, we developed a new financial performance evaluation framework to rank the companies in Iranian petrochemical industry based on fuzzy MCDM approach. To achieve this aim, firstly, the main criteria are identified by comprehensive literature review and experts’ opinion. Then, a hierarchical financial performance evaluation model is structured using main financial criteria and their sub-criteria. We used fuzzy analytic hierarchy process to determine the weights of the criteria. Then companies are ranked using fuzzy AHP and fuzzy TOPSIS comparatively. The results indicate that the obtained ranks of the companies by these methods are almost the same with respect to their own sectors.