Question 1

____________________ 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 2

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 3

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 4

____________________ 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 5

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

Accepted Answer

This statement is incorrect. Return on investment analysis actually considers costs and benefits over a longer time span than payback analysis. ROi evaluates the efficiency and profitability of an investment over several years, whereas payback analysis only looks at the time it takes for an investment to recoup its initial cost.

Question 6

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

Accepted Answer

The answer of The period between the beginning of systems...

Question 7

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 8

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

Accepted Answer

The answer of Payback analysis often is used to compare...

Question 9

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 10

____________________ 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 11

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

Accepted Answer

This statement is true. The rate of return that a company requires for an investment typically reflects the risk associated with that investment. Investing in a bond is generally considered to be a low-risk investment, while other investments may carry higher risk. Therefore, companies typically require a higher rate of return for riskier investments than the discount rate used in present value analysis.

Question 12

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 13

____________________ 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 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 are calculated.

Accepted Answer

This is the correct definition of payback analysis.

Question 15

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 present value is the best investment. This is because the net present value reflects the present value of a project's expected cash flows after accounting for the time value of money and the project's costs. A higher net present value indicates that the project is expected to generate greater returns and be more profitable.

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.

Accepted Answer

Payback analysis only considers costs and benefits occurring within the payback period, which can overlook the long-term profitability of an investment beyond this period.

Question 17

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...

Question 18

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 and discounts them to their present values. It is a more comprehensive analysis than payback analysis which only considers the time it takes to recover the initial investment.

Question 19

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 20

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

Accepted Answer

Cost-avoidance benefits are the expenses that can be avoided if a new system is installed, which means this reduces the overall cost or expenses.

Quiz 15: Financial Analysis Tools

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