7 Finance for IT Professionals Flashcards
Why is financial literacy important for IT professionals?
It enables data-driven decision-making, cost optimization, and sustainable growth in IT projects.
How does finance impact IT project planning?
It helps in budgeting, resource allocation, risk management, and return on investment (ROI) analysis.
What are the three core financial concepts in IT?
Budgeting (managing resources), Revenue (income from IT services), and Expenses (costs of IT operations).
Why is budgeting crucial for IT projects?
It ensures controlled spending, prevents overruns, and aligns financial goals with business strategy.
What are the different budgeting methods used in IT?
Activity-Based Budgeting (ABB), Zero-Based Budgeting (ZBB), Incremental Budgeting, and Rolling Budgeting.
Activity-Based Budgeting (ABB) – Allocates costs based on past consumption (e.g., KazMunayGas, Coca-Cola).
Zero-Based Budgeting (ZBB) – Justifies every expense from scratch annually (e.g., Kaspi Bank, PepsiCo).
Incremental Budgeting – Adjusts last year’s budget based on new goals (e.g., Nestlé, Kazakhtelecom).
Rolling Budgeting – Updates the budget monthly/quarterly (e.g., Beeline Kazakhstan, Magnum).
Which budgeting method is best for fast-changing IT environments?
Rolling Budgeting, as it allows continuous adjustments based on real-time business needs.
What are the key revenue models for IT companies?
Product Sales, Subscription-Based Revenue, Licensing & Royalties, Advertising & Data Monetization.
Subscription-Based Revenue – Recurring income from SaaS (e.g., Netflix, Microsoft 365).
Why are subscription-based models preferred in IT?
They provide stable, predictable revenue and improve customer retention.
What are the two main types of IT expenses?
Fixed Costs and Variable Costs.
How can IT firms reduce variable costs?
Optimize cloud usage, automate workflows, and use AI-driven cost prediction tools.
What are the three key financial statements used in IT?
Income Statement, Balance Sheet, and Cash Flow Statement.
Why is cash flow important for IT startups?
It ensures there’s enough cash to sustain operations and invest in growth.
What is the break-even point in IT projects?
The sales volume at which total revenue equals total costs, meaning no profit or loss.
How is break-even analysis useful in IT?
It helps determine the minimum number of software licenses or service subscriptions needed to cover costs.
What are the biggest financial challenges in IT budgeting?
Rapid Tech Changes, Scalability Issues, Cybersecurity Costs, and Talent Retention.
How can IT companies control budgeting risks?
By using Agile budgeting, AI-powered forecasting, and cost-benefit analysis.
What are common methods for estimating IT project costs?
Top-Down Estimation, Bottom-Up Estimation, and Three-Point Estimation.
Why is bottom-up estimation more accurate?
It considers every project component, reducing unexpected cost overruns.
How is ROI calculated for IT projects?
ROI = (Net Profit / Investment Cost) × 100.
Why is ROI important in IT investments?
It helps businesses decide whether a new software, infrastructure, or service is financially viable.
What are the biggest financial risks in IT projects?
Scope Creep, Market Volatility, and Compliance Risks.
How can companies minimize financial risks in IT?
Use contingency funds, risk assessments, and strict project scope control.
How did Netflix optimize its IT budget?
AI-Driven Forecasting, Automated Cloud Cost Management, and Data-Driven Content Spending.
AI-Driven Forecasting – Predicted cloud computing and content production costs.
What was the result of Netflix’s financial strategy?
It scaled globally, cut infrastructure costs by 40%, and increased subscribers to 230M+.
What forecasting techniques help IT companies plan better?
Trend Analysis, Regression Models, and AI & Machine Learning.
Why is AI becoming essential in IT financial forecasting?
It improves accuracy, reduces cost estimation errors, and optimizes spending.
What are the most critical KPIs for financial tracking in IT?
Customer Acquisition Cost (CAC), Customer Lifetime Value (LTV), Operating Margin, and Revenue Growth Rate.
Why is LTV vs. CAC important?
A high LTV and low CAC indicate strong profitability and growth potential.
What are the top financial tools for IT project management?
Tableau & Power BI, Google Data Studio, QuickBooks & Xero, and SAP Analytics Cloud.
Why are financial dashboards essential?
They provide real-time tracking of budgets, costs, and revenue trends.
