Comparison between Financial Ratios Analysis and Balanced Scorecard

Kiran Kiran

doi:10.3844/ajebasp.2011.618.622

Abstract

Financial ratios have long been used as a tool to evaluate the overall financial performance of a company. However, in early 1990s, a new method called Balanced Scorecard has been introduced by Robert Kaplan and David Norton to evaluate the overall controlling of a company. Problem statement: To the best of my knowledge at present there are no letrature review comparing between Financial ratios and Balanced Scorecard. Approach: This study is a conceptual paper comparing between the financial ratios analysis and balanced scorecard method. The objective of this paper is to compare between the benefits and problems of using financial ratios analysis and Balanced Scorecard method in evaluating the overall control of the company. Results: As a result, we found that the Balanced Scorecard is more efficient than financial ratios analysis. Conclusion/Recommendations: Both the balanced scorecard and financial ratios analysis are important tools for evaluating performance. So, we cannot ignore either of them.

Highlights

There are varied definitions for the concept of control
Financial ratios analysis is a static analysis because it is based on historical data, so it is not suitable for management decision making because the business environment is always changing
Philadelphia University, Philadelphia, From the above, we can conclude that financial ratios analysis is not an adequate method by which to evaluate the overall performance of an organization; the balanced scorecard is more efficient than financial ratios analysis

Summary

INTRODUCTION

There are varied definitions for the concept of control. For example, control is know by some as a system to identify the extent of implementation of the plans of an organization and to what extent they succeed in achieving their goals and objectives, by comparing what has been implemented with the outline of what is to be implemented. Comparison of financial ratios analysis and the Benefits of the balanced scorecard: The balanced balanced scorecard: The objective of this study is to scorecard has three main benefits It focuses on compare the effectiveness of financial ratios analysis the whole organization as a one unit by using a few and the balanced Scorecard method in evaluating the basic items that are needed by the organization to overall control of a company. The questions that we should ask are: (1) is engineering and customer service initiatives It financial ratios analysis an adequate method to evaluate sets out the standards of the strategy for lower levels of overall performance of an organization or not? The organization, such as unit managers and employees. which method is the more efficient?

The employees can determine the special demands to

CONCLUSION