Tang, C M; Leung, A Y T and Lam, K C (2006) Entropy application to improve construction finance decisions. Journal of Construction Engineering and Management, 132(10), pp. 1099-1113. ISSN 0733-9364
Abstract
In financial decision-making processes, the adopted weights of the objective functions have significant impacts on the final decision outcome. However, conventional rating and weighting methods exhibit difficulty in deriving appropriate weights for complex decision-making problems with imprecise information. Entropy is a quantitative measure of uncertainty and has been useful in exploring weights of attributes in decision making. A fuzzy and entropy-based mathematical approach is employed to solve the weighting problem of the objective functions in an overall cash-flow model. The multiproject being undertaken by a medium-size construction firm in Hong Kong was used as a real case study to demonstrate the application of entropy. Its application in multiproject cash flow situations is demonstrated. The results indicate that the overall before-tax profit was HKS 0.11 millions lower after the introduction of appropriate weights. In addition, the best time to invest in new projects arising from positive cash flow was identified to be two working months earlier than the nonweight system.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | decision making; entropy; financial management; fuzzy sets; weighing devices |
| Index terms: | construction finance, fuzzy set, decision-making process, case study, Hong Kong, financial management, decision-making, construction firm, profit, entropy, cash flow |
| Subjects: | economic analysis, organization, data collection methods, thermal systems, decision-making and optimization, decision analysis, Geography, financial management |
| Topics: | Geographical Context, Research Practice, Cost Management, Business Strategy, Sustainability, Risk Management |
| Descriptive scope: | 3 PCE |
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