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IT Investment > Final Term - ITIA > Flashcards

Final Term - ITIA Flashcards

1
Q

IT Investment

A

Defined as the investment decisions of allocating all types of resources to an Information System
- Personnel
- Software (Application, System)
- Hardware

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2
Q

MARR

A

Minimum Attractive Rate of Return
- Project not economically viable unless return at least the MARR

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3
Q

WACC

A

Weighted Average Cost of Capital
- Weighted average cost of equity financing and debt financing

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4
Q

Risk Premium

A

Evaluation on the risks involved in the investment

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5
Q

Economics of Information

A

A systematic series of concepts and theories that explain the role which information and IT play to assist an organization

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6
Q

Transaction cost theory (Coase’s Law)

A

To economize on transaction (internal/ external) costs
Explains the origin of firms

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7
Q

Production

A

Technology of production is increasingly cost-effective as the scale grows

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8
Q

Information

A

Information is not consumed by use, and can be used cost-effectively for larger scale of operation

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9
Q

Network externalities

A

It becomes dominant as it increases market share or geographical scope

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10
Q

Operation

A

IT increases scale and scope efficiencies of the firm’s operation

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11
Q

Transaction processing

A

IT processes basic business transactions

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12
Q

Monitoring/ performance

A

IT monitors, records, and evaluates performance of employees and their functions

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13
Q

Documentation/ Communication

A

IT maintains records of status and change in the fundamental business functions within the organization

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14
Q

Decision Support

A

IT collects and provides information relevant to managerial decision

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15
Q

Why measure IT performance

A

To evaluate the functioning of an IT Investment, to assess the business value, efficiency and effectiveness of an IT

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16
Q

Business Value of IT

A

Overall value of IT on the bottom line performance of an organization

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17
Q

Return on Equity (ROE)

A

Measures profitability of the investment to the owners

18
Q

Return on Assets (ROA)

A

Measures profitability and how efficiently assets were utilized

19
Q

Return on Investment (ROI)

A

Measures profitability based on total investment, both debt and equity

20
Q

Return on Sales (ROS)

A

Measures profitability based on sales

21
Q

Earnings per share (EPS)

A

Measures earnings per share value

22
Q

Revenue Growth

A

Measures growth in revenue over the prior period

23
Q

Sales by total assets

A

Measures how efficiently assets were used to generate sales

24
Q

Sales by employee

A

Measures sales ability effectiveness

25
Q

Inventory turnover

A

Measures the liquidity of inventory and how fast it is sold

26
Q

Cost Index

A

Ratio of cost today to cost in the past

27
Q

CER

A

Cost-estimating Relationship
- Used in early design stages to estimate plant, equipment and construction cost
- Based on design variables

28
Q

2 commonly used CERs

A
  • Cost capacity Equation
  • Factor Method
29
Q

Factor Method

A

Estimating Total plant cost
- Direct/ indirect cost can be included

30
Q

Delivered-equipment cost

A

Purchase cost of major equipment

31
Q

Installed-equipment cost

A

Equipment cost plus all make-ready costs

32
Q

Cost Factor

A

Commonly the sum of a direct cost/ indirect cost component

33
Q

Cost center

A

Department, function, or process used by the cost accounting system to collect direct/indirect costs
- Receive allocation

34
Q

Indirect-cost rate

A

Traditionally, a predetermined rate is used to allocate indirect costs to a cost center using an specified basis

35
Q

Activity-based costing

A

Provides excellent allocation strategy and analysis of costs
- More advanced, high overhead, technology-based systems

36
Q

Depreciation Terminology

A

Book (noncash) method to represent decrease in value of tangible asset over time
- 2 types
○ Book Depreciation
○ Tax Depreciation
- Both can be calculated using
○ Straight line
○ Declining balance
○ Unit of production

37
Q

Book Depreciation

A

Used for internal accouting to track value of assets

38
Q

Tax depreciation

A

Used to determine taxes due based on tax laws

39
Q

Depreciation

A

Reduction in value of an asset

40
Q

Depreciation accounting

A
  • Distribute the Cost
  • Proces of allocation, not valuation
  • Portion of the total charge

IT Investment (1 decks)

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