Comparative study on DuPont analysis and DEA models for measuring stock performance using financial ratio

Roslah Arsad, Siti Nabilah Mohd Shaari, Zaidi Isa

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

Determining stock performance using financial ratio is challenging for many investors and researchers. Financial ratio can indicate the strengths and weaknesses of a company's stock performance. There are five categories of financial ratios namely liquidity, efficiency, leverage, profitability and market ratios. It is important to interpret the ratio correctly for proper financial decision making. The purpose of this study is to compare the performance of listed companies in Bursa Malaysia using Data Envelopment Analysis (DEA) and DuPont analysis Models. The study is conducted in 2015 involving 116 consumer products companies listed in Bursa Malaysia. The estimation method of Data Envelopment Analysis computes the efficiency scores and ranks the companies accordingly. The Alirezaee and Afsharian's method of analysis based Charnes, Cooper and Rhodes (CCR) where Constant Return to Scale (CRS) is employed. The DuPont analysis is a traditional tool for measuring the operating performance of companies. In this study, DuPont analysis is used to evaluate three different aspects such as profitability, efficiency of assets utilization and financial leverage. Return on Equity (ROE) is also calculated in DuPont analysis. This study finds that both analysis models provide different rankings of the selected samples. Hypothesis testing based on Pearson's correlation, indicates that there is no correlation between rankings produced by DEA and DuPont analysis. The DEA ranking model proposed by Alirezaee and Asharian is unstable. The method cannot provide complete ranking because the values of Balance Index is equal and zero.

Original languageEnglish
Title of host publicationProceedings of the 13th IMT-GT International Conference on Mathematics, Statistics and their Applications, ICMSA 2017
PublisherAmerican Institute of Physics Inc.
Volume1905
ISBN (Electronic)9780735415959
DOIs
Publication statusPublished - 22 Nov 2017
Event13th IMT-GT International Conference on Mathematics, Statistics and their Applications, ICMSA 2017 - Kedah, Malaysia
Duration: 4 Dec 20177 Dec 2017

Other

Other13th IMT-GT International Conference on Mathematics, Statistics and their Applications, ICMSA 2017
CountryMalaysia
CityKedah
Period4/12/177/12/17

Fingerprint

ranking
Malaysia
decision making
products

ASJC Scopus subject areas

  • Physics and Astronomy(all)

Cite this

Arsad, R., Shaari, S. N. M., & Isa, Z. (2017). Comparative study on DuPont analysis and DEA models for measuring stock performance using financial ratio. In Proceedings of the 13th IMT-GT International Conference on Mathematics, Statistics and their Applications, ICMSA 2017 (Vol. 1905). [040007] American Institute of Physics Inc.. https://doi.org/10.1063/1.5012195

Comparative study on DuPont analysis and DEA models for measuring stock performance using financial ratio. / Arsad, Roslah; Shaari, Siti Nabilah Mohd; Isa, Zaidi.

Proceedings of the 13th IMT-GT International Conference on Mathematics, Statistics and their Applications, ICMSA 2017. Vol. 1905 American Institute of Physics Inc., 2017. 040007.

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Arsad, R, Shaari, SNM & Isa, Z 2017, Comparative study on DuPont analysis and DEA models for measuring stock performance using financial ratio. in Proceedings of the 13th IMT-GT International Conference on Mathematics, Statistics and their Applications, ICMSA 2017. vol. 1905, 040007, American Institute of Physics Inc., 13th IMT-GT International Conference on Mathematics, Statistics and their Applications, ICMSA 2017, Kedah, Malaysia, 4/12/17. https://doi.org/10.1063/1.5012195
Arsad R, Shaari SNM, Isa Z. Comparative study on DuPont analysis and DEA models for measuring stock performance using financial ratio. In Proceedings of the 13th IMT-GT International Conference on Mathematics, Statistics and their Applications, ICMSA 2017. Vol. 1905. American Institute of Physics Inc. 2017. 040007 https://doi.org/10.1063/1.5012195
Arsad, Roslah ; Shaari, Siti Nabilah Mohd ; Isa, Zaidi. / Comparative study on DuPont analysis and DEA models for measuring stock performance using financial ratio. Proceedings of the 13th IMT-GT International Conference on Mathematics, Statistics and their Applications, ICMSA 2017. Vol. 1905 American Institute of Physics Inc., 2017.
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