Exam 15: Financial Analysis Tools

In a fixed charge method, the IT group is regarded as a(n) _________, which is a department that is expected to break even or show a profit.

When determining economic feasibility, a systems analyst must consider a project's benefits compared to the project's _________, which includes ongoing support and maintenance costs as well as acquisition costs.

Fixed costs are costs that are relatively constant and do not depend on a level of activity or effort.

Positive benefits increase revenues, improve services, or otherwise contribute to an organization as a direct result of a new information system.

Cost-avoidance benefits refer to expenses that are necessary if a new system is not installed.

_________ is the total time that a user is connected actively to a remote server - some Internet service providers use this as a basis for charges.

Developmental costs are incurred after a system is implemented and continue while the system is in use.

When IT department costs are not charged to other departments, the information systems department is called a(n) _________ because it generates accounting charges with no offsetting credits for IT services.

Which of the following is an example of indirect costs?

The cost of customer dissatisfaction, lower employee morale, and reduced information availability are examples of _____.

_________ is the process of comparing the anticipated costs of an information system to the anticipated benefits.

_________ is a percentage rate that measures profitability by comparing the total net benefits received from a project to the total costs of the project.

Return on investment analysis considers costs and benefits over a shorter time span than payback analysis.

When comparing the net present values of projects, all things being equal, the project with the lowest net present value is the best investment.

In a client/server system, _________ is the time that the server actually responds to client requests for processing.

Indirect costs, or overhead expenses, cannot be attributed to the development of a particular information system.

Identify an example of developmental costs.

Unlike payback analysis, present value analysis considers only the earlier values and not all the costs and benefits.

Critics of return on investment analysis raised a point that return on investment (ROI) measures the overall rate of return for a total period and annual return rates vary considerably.

In present value analysis, most companies require a rate of return that is higher than the discount rate because of the degree of risk in any project compared with investing in a bond.