Abstract:

This paper develops and tests a methodology for the graphical representation of accounting data to support the process of assessing and analysing an organisation’s economic and financial position. Supported by the representation of multivariate data using human faces as proposed by Herman Chernoff in 1973, our aim is to develop an original model for graphical representation applied to economic and financial analysis. Each of the facial elements depicted in the face will represent an accounting ratio. The emotion conveyed by the face projected onto an orthonormal Cartesian basis will portray the economic and financial position of the company at a given time.

Our purpose with this work is to enable any user of financial information, regardless of their knowledge of business finance, to assess a company’s economic and financial position at a given moment in time. For those with a strong financial background, the proposed model of graphical representation is meant to be a complementary tool to the analysis.

The methodology proves able to achieve the objective we had set, as the model of graphical representation we propose revealed to be more efficient than the existing alternatives, namely financial statements and the set of economic and financial ratios, when it comes to accurately assess a company’s economic and financial position.