Financial Planning with Multiple Objectives

Abstract

* In recent years, there has been much interest in models of multiobjective decision-making. The finance literature reflects this with the formulation of problems in capital budgeting [6, 8, 13], working capital management [10], portfolio selection [7, ch. 9], and commercial bank management [2, 4, 5, 9, 11] as multiobjective decision-making problems. Given multiple conflicting objectives, resolution of any planning problem depends on subjective judgments and relative preferences of decision-makers. Unfortunately, how to include managerial preferences in normative decision models, and the effect of these preferences on optimal solutions, has scarcely been explored. Moreover, there has been little if any research on the relative merits of various programming techniques in dealing with multiobjective problems. The purposes of this paper are to discuss introducing the subjective preferences of decisionmakers into multiobjective programming models and to compare the characteristics of goal programming and multiobjective linear programming in dealing with multiobjective problems. Multiobjective Problems and Programming Techniques