TITLE:
Using DEA and AHP for Ratio Analysis
AUTHORS:
Mohammad Sadegh Pakkar
KEYWORDS:
Data Envelopment Analysis, Analytic Hierarchy Process, Ratio Analysis, Goal Programming
JOURNAL NAME:
American Journal of Operations Research,
Vol.4 No.4,
July
25,
2014
ABSTRACT:
This
research proposes an integrated approach to the Data Envelopment Analysis (DEA)
and Analytic Hierarchy Process (AHP) methodologies for ratio analysis. According
to this, we compute two sets of weights of ratios in the DEA framework. All
ratios are treated as outputs without explicit inputs. The first set of weights
represents the most attainable efficiency level for each Decision Making Unit
(DMU) in comparison to the other DMUs. The second set of weights represents the
relative priority of output-ratios using AHP. We assess the performance of each
DMU in terms of the relative closeness to the priority weights of
output-ratios. For this purpose, we develop a parametric goal programming
model to measure the deviations between the two sets of weights. Increasing
the value of a parameter in a defined range of efficiency loss, we explore how
much the deviations can be improved to achieve the desired goals of the
decision maker.This may result in various
ranking positions for each DMU in comparison to the other DMUs. An illustrated
example of eight listed companies in the steel industry of China is used to
highlight the usefulness of the proposed approach.