Chapter 4 - Data required for decision making

Question 1

What are relevant cash flows?

Answer 1

Future (ingnore sunk costs)

Incremental (ignore fixed and committed costs and include opportunity costs)

and are cashflows (not depreciation!)

Question 2

What is an opportunity cost

Answer 2

An opportunity can be defined as the value of the benefit sacrificed (notional costs could be an opportunity costs but need to be real)

Question 3

What are avoidable costs

Answer 3

the specific costs of an activity or sector of a business which would be avoided if that activity or sector did not exist

Question 4

Non relevant cost examples

Answer 4

Sunk or past costs (e.g. development costs)

Absorbed fixed overheads

Committed costs (as result of past decision)

Depreciation

Notional costs (only relevant when identief lost opportunity exists)

Question 5

What are incremental revenues?

Answer 5

difference in revenues between the alternatives (difference between accept and reject cashflows)

Question 6

Which factors (next to quantitive) need to be considered as well?

Answer 6

Qualitative factors like impact on service level, quality, environment, people, morale, systems etc…

Question 7

Which sources of MI exist?

Answer 7

Data > Information

Internal

External

Question 8

Which problems / risks are associated with collecting, analysing and presenting high quality data?

Answer 8

Duplication risk

Privacy, integrity and security concerns

Natural disasters

Malfunction

Viruses

Hackers

Electronic Eavesdropping

Human Errors

Human Resource Risk

Question 9

Which controls can mitigate these data risks?

Answer 9

General controls (SoD, Access, Business Continuity plan)

Application/Program Controls (e.g. completeness check, validity check, identification/authorisation, problem management system)

Question 10

Data is an important asset. How would you describe a Business Intelligent System

Answer 10

Business Intelligence is often used to describe the technical archetecture of systems that extract, assemble, store and access data. It’s broader than technology, it’s about using information to improve decision making.

Question 11

What is data analytics?

Answer 11

Complex analysis, data mining and predictive modelling enables by BI applications which can access both financial and non-financial data from the business’s data warehouse and external sources. Data > trends > decision making

Question 12

What is data mining?

Answer 12

Process of sorting through data to identify patterns and relationships (both structured data and unstructured data (e.g. pdf, video, web, twitter etc..)

Question 13

List benefits from business intelligence on new business opportunities, costs and other areas

Answer 13

New business Opp:

• better informed sales people generate more sales benchmarking leads to improvement of business /
• informed negotiators lead to better deals /
• better and more focussed advertisement.

Reduce costs: 
user friendly/quicker
reduce fte / handling
replace tools
fewer servers
easier to comply with regulation
align with progressing reporting standards

Other:
more accurate forecasting
quicker month end closure
more clear which products/services are most profitable
emerging trends can be spotted quicker