AHP-based system for strategic evaluation of financial information

Abstract

Financial statements are very vital to the organization and all stake holders, including government, creditors, investors, auditors and the general public. Over the years, there has been emphasis placed on evaluating the quantitative aspects of financial statements and accounting information. Less emphasis has been placed on the qualitative components. Often times the use of common sense, rule of thumb, intuition and experience apply in assessing the qualitative value of financial information. This study attempts to identify a comprehensive set of variables for the comparative evaluation of the qualitative aspects of firms’ financial statements. The Analytical Hierarchy Process [AHP] is applied in the modeling of the financial statement evaluation process. The results of the study show that the AHP provides a stepwise refinement of the results of the initial evaluation process to attain some level of optimality in the decision process regarding the evaluation of financial information of corporate organizations.