Write short notes on Computer based financial information system

A Management Information System ICT Revision Questions and Answers

Computer-based financial management systems support financial managers in decisions concerning:
• The financing of a business.
• The allocation and control of financial resources within a business.

Major financial information system categories include:
• Cash and investment management.
• Capital budgeting
• Financial forecasting
• Financial planning

Cash management systems collect information on all cash receipts and disbursements within a company on a real time or periodic basis. Cash management systems:
• Allow businesses to deposit or invest excess funds more quickly, and thus increase the income generated deposited or invested funds.
• Produce daily, weekly, or monthly forecasts of cash receipts or disbursements (cash flow forecast) that are used to spot future cash deficits or surpluses.
• Mathematical models frequently can determine optimal cash collection programs and determine alternative financing or investment strategies for dealing with forecasted cash deficits or surpluses.

Online Investment Management:
Many businesses invest their excess cash in short-term low-risk marketable securities or in higher return/higher risk alternatives, so that investment income may be earned until the funds are required. Portfolio of securities can be managed with the help of portfolio management software packages. Online investment management services:
• Are available from hundreds of online sources on the Internet and other networks.
• Help a financial manager make buying, selling, or holding decisions for each type of security so that an optimum mix of securities is developed that minimizes risk and maximizes investment income for the business.

Capital Budgeting:
The capital budgeting process involves evaluating the profitability and financial impact of proposed capital expenditures.
• Long term expenditure proposals for plants and equipment can be analyzed suing a variety of techniques. This application makes heavy use of spreadsheet models that incorporate present

value analysis of expected cash flows and probability analysis of risk to determine the optimum mix of capital projects for a business.

Financial Forecasting and Planning:
A variety of financial forecasting packages provide analytical techniques that result in economic or financial forecasts of national and local economic conditions, wage levels, price levels, and interest rates. Financial Planning systems use financial planning models to evaluate the present and projected financial performance of a business or of one of its divisions or subsidiaries. Financial planning systems:
• Help determine the financial needs of a business and analyze alternative methods of financing the business.
• Use financial forecasts concerning the economic situation, business operations, and types of financing available, interest rates, and stock and bond prices to develop an optimal financing plan for the business.
• Frequently use electronic spreadsheet packages and DSS generators to build and manipulate models.
• Are used to answer what-if and goal-seeking questions in order to evaluate financial and investment alternatives.

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