Exam 15: Toolkit C: Financial Analysis Tools

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

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

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

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.

The time taken by payback analysis to recover an information system's costs is called the _________.

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.

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

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

The _________ of a project is the total present value of the benefits minus the total present value of the costs.

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

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

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

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

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

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.

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

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

Which of the following is an example of indirect costs?

Which of the following is an example of variable costs?

To help system analysts perform present value analysis, adjustment factors for various interest rates and numbers of years are calculated and printed in tables called _________.