Comparison between Financial Ratios Analysis and Balanced Scorecard

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.

Tomato Processing Firms’ Management: A Comparative Application of Economic and Financial Analyses

“…Whittington (1980) has identified two main uses of ratios: The first is to compare the results of the company with a general standard; the second is to derive predictive information on management. Recently, other researchers (Alrafadi and Md-Yusuf, 2011) have analyzed financial ratios and balanced scorecard to compare benefits and problems of using financial ratios analysis and Balanced Scorecard method. Other reserechers (Bahiraie et al, 2009) apply financial ratios to new geometric technique for empirical analysis of bankruptcy risk (Risk Box measure).…”