Deck 15: Financial-Analysis-Tools

Question 1

Operational costs are incurred only once at the time a system is developed or acquired.

Answer 1

False

Question 2

Payback analysis that is recorded and calculated in spreadsheets requires a formula to display cumulative totals,year by year.

Answer 2

True

Question 3

Direct costs usually are more difficult to identify and predict than indirect costs.

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

Variable costs are costs that vary depending on the level of activity.

Question 8

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

Question 9

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.

Question 10

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

Question 11

Intangible costs are costs that can be assigned a specific dollar value.

Question 12

Tangible costs are costs whose dollar value cannot be calculated easily.

Question 13

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

Question 14

When conducting a payback analysis,the time it takes for the accumulated benefits of an information system to equal the accumulated costs of developing and operating the system is calculated.

Question 15

Direct costs are costs that can be associated with the development of a specific system.

Question 16

Some managers are critical of payback analysis because it places all the emphasis on early costs and benefits and ignores the benefits received after the payback period.

Question 17

Critics of return on investment analysis raised a point that the return on investment (ROI)technique does not recognize the timing of costs and benefits.

Question 18

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

Question 19

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.

Question 20

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

Question 21

Which term is used for the total time that a user is connected actively to a remote server?

A) connect time
B) download speed
C) processing speed
D) costing time

Question 22

Which concept includes ongoing support and maintenance costs as well as acquisition costs?

A) overhead expenses
B) total cost of ownership
C) time value of money
D) resource allocation

Question 23

Which process involves determining how long it takes an information system to pay for itself?

A) present value analysis
B) cost-benefit analysis
C) return on investment analysis
D) payback analysis

Question 24

In a fixed charge method,the IT group is regarded as a _____ center,which is a department that is expected to break even or show a profit.

A) profit
B) feasibility
C) resource
D) volume

Question 25

Return on investment (ROI)is calculated using the formula _____.

A) ROI = (total benefits - total costs)/ total costs
B) ROI = (total costs - total benefits)/ total costs
C) ROI = (total benefits - total costs)/ total benefits
D) ROI = (total costs - total benefits)/ total benefits

Question 26

Which is an example of variable costs?

A) Project team members' salaries
B) Printer paper costs
C) Hardware rental charges
D) Property taxes

Question 27

The period between the beginning of systems operation and the point when operational costs are rapidly increasing is called the ____ of the system.

A) economically useful life
B) positive benefits
C) variable cost
D) present value

Question 28

Which is an example of indirect costs?

A) Project team members' salaries
B) Hardware purchases used only for new systems
C) Consumable supplies costs
D) Insurance expenses

Question 29

Which is an example of operational costs?

A) Project team members' salaries
B) Software purchases
C) Initial user training costs
D) System maintenance evaluations

Question 30

The _____ value of a future dollar is the amount of money that,when invested today at a specified interest rate,grows to exactly one dollar at a certain point in the future.

A) projected
B) present
C) potential
D) perceived

Question 31

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

A) server processing
B) connection
C) resource allocation
D) chargeback

Question 32

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

A) tangible costs
B) intangible costs
C) fixed costs
D) variable costs

Question 33

_____ means that the projected benefits of a proposed system outweigh the estimated costs.

A) Operational feasibility
B) Technical feasibility
C) Economic feasibility
D) Schedule feasibility

Question 34

Identify an example of developmental costs.

A) Ongoing training costs
B) Software purchases
C) System maintenance evaluations
D) Annual software license fees

Question 35

Identify an example of direct costs.

A) Project team members' salaries
B) Power consumption costs
C) Copy machine rentals
D) Insurance expenses

Question 36

_____ is performed to determine the economic feasibility of an information system project and to compare alternative solutions.

A) SWOT-check analysis
B) Economical detriment analysis
C) Contrast analysis
D) Cost-benefit analysis

Question 37

Identify an example of fixed costs.

A) Consumable supplies costs
B) Printer paper costs
C) Hardware rental charges
D) Telephone charges

Question 38

What term is used for the charging of indirect IT department costs based on the resources used by an information system?

A) indirect payback
B) subjective usage
C) resource allocation
D) fixed charging

Question 39

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

A) lexicon
B) cost center
C) hub
D) repository

Question 40

A(n)_____ method is a technique that uses accounting entries to allocate the indirect costs of running an IT department.

A) annuity
B) feedback
C) chargeback
D) acquisition

Question 41

Explain how return on investment (ROI)may be used for ranking projects.

Question 42

List the steps involved in payback analysis.

Question 43

Discuss the two ways to calculate present value using a spreadsheet program such as Microsoft Excel.

Question 44

Explain the no charge method.

Question 45

Provide examples of cost-avoidance benefits.