A Comparison of Ratios and Data Envelopment Analysis: Efficiency Assessment of Taiwan Public Listed Companies

Abstract

The need to assess business firm’s efficiency is important for all players involved in a business. Efficiency assessment has previously been conducted using financial ratio analysis. However, it failed when simultaneously considering multiple inputs and outputs. Because of this difficulty the data envelopment analysis (DEA) is proposed as an alternative approach for handling multiple inputs and outputs. This study introduces financial ratio analysis and the DEA model for assessing performance and uses panel data of 24 Taiwan public listed companies to demonstrate the merit of the model in assessing efficiency with quantitative guidance for policy formulation