Question

Question 1

1. Differentiate between Data and Information.
2. Identify and explain at least two ways in which Information Technology enhances:

1. Financial analysis
2. Management decision making, and

(iii) Development of careers in Finance   

3. State and briefly explain five (5) limitations of using Information Technology in Finance?
4. Giving examples, briefly explain two of the following management reports:

1. Analyses
2. Prediction
3. Forecast
4. Optimization report.
5. Exceptional report.

Answer 1

a) Difference between Data & Information :-

1. Data is a raw and unorganized form of material/ fact that does'nt have any meaning. Data is needed to be processed to make it meaningful.
   Information is the processed and structured form of a set of data that conveys the intended meaning to the reciepient.
2. Data is simple and unorganized and comprises of symbols, numbers, characters, facts, observations, images etc.
   Information is the processed form of raw data and has a particular purpose, relevance & context.
3. Since data contain numbers, statements, images, characters etc. in raw format, it always needs to be manipulated and interpreted by human or machine to derive its meaning.
   Information provides meaning to a raw data set and improves the reliability of the data. The information contains all the useful details and reduces uncertainty & redundancy.
4. Data alone has no significance and is independent of information. Whereas information has significance and is dependent on data.
5. Data is measured in bits and bytes. Since Infromation is meaningful, it is measured in terms of units of  like time, quantity etc.
6. Data can be represented in the form tables, graphs, data tree, bar charts etc. Information comprises of the thoughts and ideas derived from the data and is mainly conveyed through language form.

b) 1) Financial Analysis is the process of evaluating a business, project, budget or any finance related transactions to determine its performance and viability. Financial analysis is done for any business concern to determine its stability, solvency, profitability in the future before making any monetory investments in that concern.
Information technology helps to process and interpret the huge amount financial data and statistics that are required for the financial analysis purpose. Information technology helps in the rapid calculation of the financial statistics and automated prediction of various trends in the financial data. The various IT applications not only helps to efficiently process the financial data but also enhances the speed. The IT enabled systems help to make real time analysis of the financial market trends without any complexity.

2) Management decision making requires lot of attention and precision. The IT enabled softwares help the finance managers to easily calculate and studyrows of financial data. Accurate interpretations of the financial data make it understandable and based on it the managers and the CEO can take important decisions without any obstruction.For example. the CEO wants to make important decisions regarding an upcoming product release, if the financial manager is ready with the right amount of data at the right time, it becomes easier for the CEO to take the decisions.
Enterprise resource planning is an IT enabled system comprising of various software modules that serve the needs of the various functional areas of the company. It allows real time flow of information among the various departments like manufacturing, marketing and finance divisions which ultimately helps in the managerial decision making process. Automation of financial reporting system also helps in the preparation of customized financial reports. The managers can better forecast their company's financial results since they have real time access to all the segments of the company.

3) Development of careers in finance -
Banking and financial services Industry is one industry that is heavily reliant on the IT enabled systems. Hence the IT professionals can make a good career in this industry.
The IT professionals are also needed in finance application testing roles. The IT organizations have job roles like Quality analyst, testing engineer, research analyst, business analyst etc. In these roles an IT engineer is required to do the manual / automated testing of various financial application process.

Limitations of using Information Technology in Finance

1. Most IT solutions used now are cloud based to enable the professionals to work from their home. join meeting anytime of the day. However the growing use to IT based systems has increased the security risks of the valuable financial information of the company. The growing cybercrime and cyber attacks on the various banking and finacial services firms are an example of this. The hackers may steal the confidential company data. They may hack into the automated payment systems and siphon off money from the customer's accounts to offshore accounts. The hackers are also holding the websites hostages through ransomwares, compelling them to pay hige sums of money as ransom before they can resume their work again.
2. The various spywares can steal valuable and personal financial information from customers or employees. This stolen information is then used for identity theft, fraudulent purchases etc.
3. When the business firms use IT systems they have to incur huge compliance costs in order to secure their client data as per the mandates of the regulatory authorities.
4. The implementation and continous updation of the softwares and hardwares for the IT basec system also require large investments