Question 1

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.

Accepted Answer

The answer of When determining economic feasibility, a systems analyst...

Question 2

____________________ is the charging of indirect IT department costs based on the resources used by an information system.

Accepted Answer

The answer of ____________________ is the charging of indirect IT...

Question 3

With 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.

Accepted Answer

The answer of With a fixed charge method, the IT...

Question 4

____________________ is the process of determining how long it takes an information system to pay for itself.

Accepted Answer

The answer of ____________________ is the process of determining how...

Question 5

Payback analysis often is used to compare or rank projects because later benefits are noticed.

Accepted Answer

Payback analysis is used to determine how long it will take to recover the initial investment, focusing on early returns rather than later benefits.

Question 6

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.

Accepted Answer

Payback analysis only considers the time it takes for the initial investment to be recovered, which means it may not take into account the benefits that come after the payback period has ended. Some managers consider this to be a limitation of the method.

Question 7

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

Accepted Answer

Present value analysis considers all the costs and benefits over the entire life of the investment, taking into account the time value of money. Payback analysis, on the other hand, only considers the initial costs and the expected time it will take to recoup those costs.

Question 8

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.

Accepted Answer

The answer of When IT department costs are not charged...

Question 9

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

Accepted Answer

The statement is incorrect. Return on investment analysis considers costs and benefits over a longer time span than payback analysis.

Question 10

____________________ 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.

Accepted Answer

The answer of ____________________ is the total time that a...

Question 11

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

Accepted Answer

The answer of ____________________ is the process of comparing the...

Question 12

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

Accepted Answer

ROI is calculated by dividing the net profit by the total investment, and it gives an overall rate of return for a certain period. Annual return rates may vary based on different factors such as time period and investment type. Therefore, ROI measures the overall return, while annual return rates vary.

Question 13

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.

Accepted Answer

Companies require a higher rate of return for risky projects compared to bonds because the degree of risk is higher in projects. This higher rate of return is reflected in the discount rate used in present value analysis.

Question 14

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

Accepted Answer

The answer of A(n) ____________________ is a technique that uses...

Question 15

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

Accepted Answer

Cost-avoidance benefits are benefits that result from avoiding future costs that would have been incurred if a certain action or decision were not taken. In the case of a new system installation, cost-avoidance benefits would refer to expenses that would be necessary if such a system is not installed, such as maintenance costs, repair costs, or inefficiencies that can lead to higher operating costs.

Question 16

The ROI (return on investment) technique recognizes the timing of costs and benefits.

Accepted Answer

The answer of The ROI (return on investment) technique recognizes...

Question 17

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

Accepted Answer

The answer of In a client/server system, ____________________ is the...

Question 18

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

Accepted Answer

The project with the highest net present value is the best investment.

Question 19

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 are calculated.

Accepted Answer

This is an accurate description of what is involved in a payback analysis.

Question 20

The time it takes to recover an information system's costs is called the ____________________.

Accepted Answer

The answer of The time it takes to recover an...

Quiz 15: Financial Analysis Tools