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Appendix D
Financial Information Systems
MANAGEMENT INFORMATION SYSTEMS 8/E
Raymond McLeod, Jr and Geor!e Sc"e##
Copyright 2001 Prentice-Hall, Inc.D-1
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Users of Financial InformationUsers of Financial Information
Internal usersInternal users
!anagers!anagers
"onmanagers"onmanagers #n$ironmental users#n$ironmental users
%hose &ith 'irect (usiness relationships%hose &ith 'irect (usiness relationships
%hose &ith no 'irect relationships%hose &ith no 'irect relationships
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Financial Information SystemsFinancial Information Systems
C)IS su(system that pro$i'es information toC)IS su(system that pro$i'es information to
persons an' groups (oth insi'e an' outsi'e thepersons an' groups (oth insi'e an' outsi'e the
firm concerning the firm*s financial mattersfirm concerning the firm*s financial matters
Information typeInformation typePerio'ic an' special reportsPerio'ic an' special reports
+esults of mathematical simulations+esults of mathematical simulations
#lectronic communications#lectronic communications'$ice of epert systems'$ice of epert systems
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Database
Accounting
information
system
Internal
audit
subsystem
Financial
intelligence
subsystem
Forecastingsubsystem
Fundsmanagement
subsystem
Control
subsystem
Internal sources
Environmental
sources
Input
subsystems
Output
subsystems
Users
Data Information
A Model of a Financial Information SystemA Model of a Financial Information System
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Prewritten Financial SoftwarePrewritten Financial Software
!ore pre&ritten soft&are eists for the!ore pre&ritten soft&are eists for the
financial area than any otherfinancial area than any other
!ost is accounting in nature!ost is accounting in nature
)oth general (usiness an' personal)oth general (usiness an' personal
pro'ucti$ity soft&arepro'ucti$ity soft&are
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Accounting Information SubsystemAccounting Information Subsystem
%he foun'ation upon &hich all information-%he foun'ation upon &hich all information-
oriente' C)IS are (uiltoriente' C)IS are (uilt
ho 'i' &hatho 'i' &hathenhen
herehere
Ho& muchHo& much
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Internal Audit SubsystemInternal Audit Subsystem
InternalInternal
u'it committeeu'it committee
4 Pro(a(ly inclu'es the CF5Pro(a(ly inclu'es the CF54 Director of internal au'itingDirector of internal au'iting
#ternal au'itors#ternal au'itors
Importance of o(6ecti$ityImportance of o(6ecti$ity
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$"ie%
Exec&'i(e
O%%icer
Direc'or o%
In'erna#
A&di'in!
In'erna#
A&di'in!
Depar'men'
A&di' $ommi''ee
)oard o% Direc'or*
Position of
Internal Auditing
in a Firm
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Types of Auditing ActivityTypes of Auditing Activity
Financial au'itingFinancial au'iting
5perational au'iting5perational au'iting
'e9uacy of controls'e9uacy of controls
#fficiency#fficiency
Compliance &ith company policyCompliance &ith company policy
Concurrent au'itingConcurrent au'iting
Internal control systems 'esignInternal control systems 'esign
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Internal Auditor as a Member ofInternal Auditor as a Member of
the CIS Teamthe CIS Team
+e9uire' ;no&le'ge an' s;ills of au'itors+e9uire' ;no&le'ge an' s;ills of au'itors
"ot al&ays accounting-relate'"ot al&ays accounting-relate' Senior management attitu'e ma;es aSenior management attitu'e ma;es a
'ifference'ifference
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1%1%
10%10%
0%0%
100%100%
!00%!00%
1"00%1"00%
000%000%
#e$uirements#e$uirements
DesignDesign
DevelopmentDevelopment
odule testingodule testing
Integrated testingIntegrated testing
ImplementationImplementation
Operation&maintenanceOperation&maintenance
Conceptuali'ationConceptuali'ation#elativeCost
of
#elativeCost
of
Fi(ingaDefec
t
Fi(ingaDefect
!scalating Cost of Correcting "esign !rrors!scalating Cost of Correcting "esign !rrors
as the S"#C Progressesas the S"#C Progresses
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Financial Intelligence SubsystemFinancial Intelligence Subsystem
+epresents the firm in esta(lishing t&o-&ay+epresents the firm in esta(lishing t&o-&ay
lin;s &ith
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Financial IntelligenceFinancial Intelligence
Subsystem $cont%&Subsystem $cont%&
Financial community-Financial community-
In'irect influence from theIn'irect influence from the
go$ernmentgo$ernmentSources of financial intelligence
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Forecasting SubsystemForecasting Subsystem
5ne of the ol'est mathematical acti$ities in (usiness5ne of the ol'est mathematical acti$ities in (usiness +ely on past 'ata+ely on past 'ata
!a;e semistructure' 'ecisions!a;e semistructure' 'ecisions
Cannot (e perfectCannot (e perfect
Short-term forecastsShort-term forecasts
5ne to three years5ne to three years
!ay (e 'one (y mar;eting!ay (e 'one (y mar;eting
>ong-term forecasts>ong-term forecasts ?sually 'one (y finance, or special planning group?sually 'one (y finance, or special planning group
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Forecasting MethodsForecasting Methods
"on9uantitati$e @9ualitati$eA"on9uantitati$e @9ualitati$eA
Panel consensusPanel consensus
Delphi metho'Delphi metho' #lectronic meeting system @#!SA help#lectronic meeting system @#!SA help
com(ine non9uantitati$e an' 9uantitati$ecom(ine non9uantitati$e an' 9uantitati$e
metho'smetho's
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Forecasting Methods $cont%&Forecasting Methods $cont%&
=uantitati$e forecasting metho's=uantitati$e forecasting metho's
+egression analysis is 'ominant+egression analysis is 'ominant
+elate' metho's are a$aila(le+elate' metho's are a$aila(le!any soft&are pac;ages use'!any soft&are pac;ages use'
4 !inita(!inita(
4 IDID4 SSSS
4 SPSSSPSS
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Sales Forecast Using SAS
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Using the 'umber ofUsing the 'umber of
Salespersons to Pro(ect SalesSalespersons to Pro(ect Sales
0
1
2
34
5 10 15 20 25 30 35
.
. .
.
Sales prediction
S a
l e s
i
n
t h
o u s a n d
s
o f
u n
i t
s
Number of salespersons
Regr
ession
line
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Sales Forecast Produced by SAS
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Sales Forecast "ataSales Forecast "ata
1 " )0
" "* )0
+ +1 ! ,0
", ! 100
! ++ - 100
- +) * 110
* +* ) 1"0
) 0 ) 100
, ! , ,0
10 , 10 100
.ales Advertising /rice #atio.ales Advertising /rice #atio
ear 2 3"2 3+2ear 2 3"2 3+2
4istorical Data4istorical Data
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Funds Management SubsystemFunds Management Subsystem
!anage to achie$e!anage to achie$e+e$enue flo& inflo& ecee's epense outflo&+e$enue flo& inflo& ecee's epense outflo&
!aintain sta(ility!aintain sta(ility
Cash flo& mo'elsCash flo& mo'els
Performs cash flo& analysisPerforms cash flo& analysis
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Unbalanced Cash Flow !)ampleUnbalanced Cash Flow !)ample
Do##ar*+m
i##ion*,
.ales anufacturing e(pensesar5eting and administration
e(penses
0
0.1
0.2
0.
0./
0.
0.3
0.7
0.8
0.:
1
1.1
1.2
Ban Fe( !ar pr !ay Bun Bul ug Sep 5ct "o$ Dec
Mon'"*D-22
" l i S li P !li i
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"elaying Supplier Payments !liminates"elaying Supplier Payments !liminates
Months of 'egative Sales *evenueMonths of 'egative Sales *evenue
Do##ar*+mi##ion*,
.ales anufacturing e(penses ar5eting and administratione(penses
0
0.1
0.2
0.
0./
0.0.3
0.7
0.8
0.:
1
1.1
1.2
Ban Fe( !ar pr !ay Bun Bul ug Sep 5ct "o$ Dec
Mon'"*
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Control SubsystemControl Subsystem
5perating (u'get for the fiscal year5perating (u'get for the fiscal year
%hree approaches%hree approaches
1.1.%op-'o&n%op-'o&n
2.2.)ottom-up)ottom-up
..Participati$eParticipati$e
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F ti d l
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+%
,%
-%
.%
Final organi'ational
budget
/%
The udgeting
Process
Forecasting model
.ales forecast
6op
management
#esource planning
model
4uman resource
re$uirementsFinance
re$uirements
anufacturing
re$uirements
ar5eting
re$uirements
Finance
manager
4uman
resource
manager
Information
services
manager
anufacturing
manager
ar5eting
manager
#e$uested
finance
budget
#e$uested
7uman
resources
budget
#e$uested
information
services budget
#e$uested
manufacturing
budget
#e$uested
mar5eting
budget
Approved salesforecast
6op
management
Information services
re$uirements
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8UD9E6 #E/O#6
A. OF :A;UA# +1 ID+I#S 2,00 22,000 1,00- :,000 /,20 /,70-
%+#> 8,20 :,000 70E 2,00 28,100 /,300E
#"%#+%I"!#"% 1,/00 1,3 2E /,200 ,100 :00E
%#>#PH5"# 200 8 11E 300 22 7E
+#"% 0 1,30 1,30 0
F?+"I%?+# 0 0 0 /20 0 8E
S?PP>I#S 32 /10 21- 1,87 1,20 -
!ISC. /00 320 220E 1,200 1,:3 73E
%5%> /,:10 /,28 32- :2,/00 :,070 370E
!)ample udget *eport
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Performance *atiosPerformance *atios
current assetsCurrent ratio =
current liabilities
cost of goodsInventory turnover ratio =
average inventor
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Users of Financial Information SystemUsers of Financial Information System
Vice-president of nance X X XOther executives X X X
Controer X X X!ana"er of accountin" X!ana"er of nancia pannin" X X#irector of $ud"ets XOther functiona %ana"ers X X X
Subsystem Funds User Forecasting Management
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SummarySummary Financial information systems pro$i'e a &i'e range ofFinancial information systems pro$i'e a &i'e range of
information for (oth managers an' intereste' eternal peopleinformation for (oth managers an' intereste' eternal people ?ses inclu'e
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