Organization's Profitability Analysis: A Fuzzy Logic Approach

Abstract

This article proposes a new methodology that uses fuzzy logic to measure the profitability of organizations. In this research we have utilized 87 financial reports of 2003, which were published in the "Valor1000 do Jornal Valor Economico". The data collected was analyzed and classified according to the Matarazzo's scale (1997), and then assigned a qualitative variable according to their position in relation to the decil. This study has utilized the specific software FuzzyTech in order to define the pertinence functions. With the help of two specialists 69 inference rules were developed in order to implement the fuzzy system. The results founded in the fuzzy system were compared to the results found by the specialists. We obtained an average error of 9,58% with a standard deviation of 7,40%, and in two financial reports the results founded by the proposed fuzzy model have coincided exactly with the specialists, demonstrating that fuzzy logic models can be used as an efficient tool to validate expert's opinion.

Keywords: artificial intelligence, fuzzy logic, profitability analysis, expert systems, intelligent systems, business performance

JEL Classification: M41, G29