Unlocking IT Success: Strategies and Financial Insights
Keys for Successful IT Department
Building Relationships
Building strong relationships is crucial for IT success.
Coaching and Developing the Team
Coaching and developing the team ensures continuous growth and improvement.
Staying on Top of Technology
Staying current with technological advancements is essential in the ever-evolving IT landscape.
Supporting All Aspects of the Company
Supporting all aspects of the company ensures alignment between IT and business goals.
Supporting Different Lines of Business
Supporting different lines of business requires understanding their unique needs and challenges.
Learning about the Business
Learning about the business provides context for IT decisions and solutions.
Liaison Role
Acting as a liaison between IT and other departments fosters collaboration and communication.
Cloud Computing: Limitless Potential
Cloud computing supplements or replaces internally owned computer resources using:
- Internet-based storage
- Processing power
- Computer applications
It allows access to vast computing resources with minimal investment.
Intranet
An intranet is an organization’s private network of internally linked websites accessible only to employees.
Extranet
An extranet is a system that allows outsiders limited access to a firm’s internal information network.
Information System (IS)
An information system (IS) uses IT resources to convert data into information and to collect, process, and transmit that information for decision-making.
Data vs. Information
Data: Raw facts and figures that may not have much meaning on their own.
Information: Meaningful, useful interpretation of data.
Data Warehousing and Data Mining
Data Warehousing: The collection, storage, and retrieval of data in electronic files.
Data Mining: The application of electronic technologies to search, sift, and reorganize data to uncover useful information.
Knowledge Information System
A knowledge information system supports knowledge workers by providing resources to create, store, use, and transmit new knowledge for useful applications.
Management Information System (MIS)
A management information system (MIS) supports managers by providing information—reports, schedules, plans, and budgets—for decision-making.
Decision Support System (DSS)
A decision support system (DSS) is an interactive system that creates virtual business models for specific decisions and tests them with different data to see how they respond.
Earnings Per Share (EPS)
The most widely used business statistic globally, EPS measures the net income for each outstanding share of common stock. (Issued stock – treasury stock = outstanding shares).
Calculation: EPS = (Net Income – Preferred Dividends) / Average Number of Common Shares Outstanding
Income Statement Analysis
- Sales Growth: Compounded Annual Growth Rate
- Gross Profit: Dollar growth and percentages
- Operating Expenses: Increase in dollars and comparison to sales growth
- Interest: Reasonableness of income and expense dollars and trends
- Provision for Income Taxes: Dollars, reasonableness, benefits
- Income Before Taxes: Growth, trends
- Net Income: Growth, trends
- Basic and Diluted Earnings per Share: Growth, trends, and significant dilution
Balance Sheet Analysis
- Cash and Cash Equivalents: Growth, trends
- Inventories: Dollars invested, trends, inventory turnover, days in inventory
- Accounts Receivable: Dollars, trends, accounts receivable turnover, days in A/R
- Current Assets: Dollars, trends
- Fixed Assets: Dollars, trends, and sales generated by fixed assets
- Miscellaneous Assets, Deferred Taxes, Goodwill: Dollars, trends
- Current Liabilities: Dollars, trends
- Long-Term Debt: Dollars, trends
- Stockholders’ Equity: Stock, paid-in capital, retained earnings, dollars, trends
- Statement of Stockholders’ Equity: Dollars, trends, and line-item review for material unusual items
Financial Ratios
Profitability Ratio: Measures a firm’s potential earnings (e.g., ROE, ROA).
Activity Ratio: Evaluates management’s efficiency in using a firm’s assets.
Short-Term Solvency Ratio: Measures a company’s ability to pay immediate debts.
Current Ratio
Measures a company’s ability to pay current debts out of current assets.
Current Ratio = Current Assets / Current Liabilities
Satisfactory » 2:1 or Higher
Examples:
- Caterpillar – $580M
- Waste Management – $1.5B
- HealthSouth – $2.7B
- WorldCom – $11B (Ponzi scheme)