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However, the customer relinquishes control over the evolution of the software (upgrades happen when the SaaS vendor decides they should happen, whether or not it‟s disruptive to the customer). The cost of the application itself is an ongoing expense as part of the charge from the vendor rather than a onetime up-front cost. The cost of operation for the application is an ongoing expense, which may or may not be an advantage depending on the organization‟s current technology mix. SaaS is considered a low-cost way for a business to use commercially licensed software without the associated high initial cost or manpower requirement. Applications that aren‟t mission critical but are processing heavy are good candidates for SaaS implementations. Organizations are looking to SaaS vendors to supply services for customer relationship management, videoconferencing, human resources, e-mail, and call centers. An earlier model of deployment called application service providers (ASPs) also provided such services but were client-server implementations. The downside of using an SaaS software solution is that the firm is placing its destiny in another company‟s hands and is dependent on that company‟s security and financial health. The upside is that the firm is not responsible for purchasing the application, maintaining it, and having to provide the computer power to process the data. Open Source Software The idea behind open source software is to develop software that makes its source code freely available for use, change, and/or distribution. The Open Source Initiative determines whether software can be considered open source, the major criteria being access to the source code itself and free redistribution of the source code itself. (Source code is the code that is translated into what the computer‟s CPU actually needs to do, which is called machine code.) Organizations have been slow to adopt open source software, worrying about the support, reliability, and viability of such products. The success of UNIX has begun to dispel these fears. Organizations are saving billions of dollars a year by installing open source software rather than licensed software. Open source development has produced reliable and high-quality software quickly. There are many independent programmers testing and fixing bugs. Programmers can build custom interfaces and add new abilities. Organizations can adopt these new features as they see fit—they basically plug into existing source code. Larger successful projects enforce rules to facilitate teamwork and ensure system testing and documentation. Open source software does have its critics. Open source may allow hackers to determine weaknesses in the software. It is hard to build a sound business model around the open source development process, thus raising concerns about viability into the future. Networks and Communications It is becoming increasingly common in industry to create virtual wide area networks using multiple, interconnected local area networks. These networks also connect the older mainframe and midrange computers that industry uses for its older legacy systems to the client terminals on the users‟ desks.
Exhibit 20.6 is a model of a typical company‟s wide area network, and it demonstrates how all of the older technology interconnects with the newer local area networks and the Internet. In the early 1990s, there were numerous, competing network operating systems and protocols. Novell and its NetWare software held the largest market share at the time. As operating systems for computers themselves have evolved, newer operating systems such as Microsoft Windows Server 2008 have incorporated many features of the original network operating systems, in some cases making network operating systems themselves obsolete. Because of the Internet‟s overwhelming success, transmission-control protocol/ Internet protocol (TCP/IP) has become the standard communications protocol. The 1990s saw the advent of virtual organizations. Virtual organizations are formed when companies join together to create products or enterprises that they could not have created individually. In most cases, information technology allows companies to create these partnerships and share information as if they were one company. Using communications and collaborative software for e- mail, chat, instant messaging, file sharing, blogs, wikis, and online chats, the partners can communicate and share information with each other about their individual progress, in order to ensure the best possible success. This is discussed further in the section on IT strategy. Exhibit 20.6 Model of a wide area network. Database
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Table of Contents Title Page Copyri
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Chapter 6 - Planning Capital Expend
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For Further Reading Part IV - Manag
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Successful Postmerger Implementatio
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This book is printed on acid-free p
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Syllabus How Chapter Topics in This
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Some of these experts are full-time
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About the Contributors Richard T. B
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Advances in Quantitative Analysis o
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enterprise development. Dr. Zachara
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The left side shows Nutrimin‟s in
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Gail, let‟s go over this balance
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Gail, do you have any questions abo
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11. Not all expenses are cash outfl
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Financial Statements: Who Uses Them
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profitability to keep investing for
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Financial Accounting Standards It i
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Downloadable Resources for this cha
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Next, we explain each of these thre
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liquidity. Or, more simply, achievi
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If these ratios are seriously defic
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The debt-to-equity ratio is evaluat
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year 1 to year 3. The net effect wa
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to rate of return on the equity. Th
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Other types of comparisons of finan
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income/sales), asset turnover (sale
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successful businesspeople should ha
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More than a decade ago, a special c
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companies is used for illustration.
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The identification of nonrecurring
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The Dow Chemical single-step income
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is a pretax measure, but income fro
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Sources: Companies‟ annual report
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Exhibit 3.11 Examples of discontinu
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amortization purposes, the Company
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Examples of nonrecurring items disc
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During Fiscal 2006, inventory quant
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The nonrecurring items of Boston Sc
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The disclosure presented earlier in
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gains or losses that appear as part
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ecurring as for Kimberly-Clark, the
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Summarizing Nonrecurring Items and
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This example of using the SEB works
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Exhibit 3.27 Other income (expense)
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Source: Pfizer, Inc., annual report
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Exhibit 3.30 Acquisitions note: Pfi
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Source: Pfizer, Inc., annual report
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Exhibit 3.33 Cost-reduction initiat
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Exhibit 3.36 Share-based payment no
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The Pfizer Worksheet Analysis: Down
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Some Further Points on the Pfizer W
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• It is common to treat items as
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FedEx Corporation (2007) First Sola
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1 The American Institute of Certifi
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28 These alternative translation me
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If you need some instruction in Exc
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To solve using Excel, open your Exc
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As you can see from the previous ex
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C6 = 5 • Now enter the “=” si
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Ordinary Annuity An ordinary annuit
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To confirm that the number of payme
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The FV of this first payment into t
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Exhibit 4.15 Finding the future val
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Exhibit 4.18 Finding the present va
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From Exhibit 4.20, we see that as t
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Exhibit 4.22 Amortization schedule
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Exhibit 4.25 Regular cash flows wit
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Internet Links For Further Reading
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Investors who are risk averse will
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considering the risk of a single as
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Portfolio Risk Stand-alone risk is
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In spite of unique or diversifiable
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If a particular stock is highly sus
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The formula tells us that, to begin
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for the entire market of stocks sin
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The dividend per share for preferre
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If you are able to determine the cu
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Debt finance is the lower-cost meth
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We don‟t observe many firms whose
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Capital Structure in Practice Finan
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are able to observe regularities in
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dividends and capital gains. We wil
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where EBIT is earnings before inter
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Since long-term debt holders have a
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accept more investment projects. Re
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A beer company is considering build
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accounts receivable, and tabulates
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profit by the tax rate determines t
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Accounting profit often mixes varia
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The concept that future cash flows
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Like project A, project C also cost
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The after-tax interest rate is the
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equal mix of debt and equity, its d
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The payback period rule stipulates
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The IRR rule is appealing in that i
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complete with its real options is g
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What does it matter that one invest
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Exhibit 7.3 Time line in dollars an
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There are a number of countries in
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eturn of 10% on its investments in
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Exhibit 7.12 Summary of exchange ra
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and so will the value of the liabil
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Source: CIA, World Factbook, availa
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Exhibit 7.18 Net present value of c
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equired interest payments to be pai
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So if the assistant treasurer was r
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This theory is far from perfect, as
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The Consulting Firm Jennifer, Jean,
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part by a statute, the Uniform Limi
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formation in Delaware (or any state
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purpose of requiring qualification.
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Phil‟s death may terminate the bu
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the transfer. This means that if Br
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These rules extend to tort liabilit
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In the absence of a meeting, stockh
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A more detailed discussion on the b
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Partnerships If possible, the resul
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associated with this arrangement ar
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Partnerships are also not separate
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For most start-up businesses, howev
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form, even at the risk of some unli
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likely that our consultants will be
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Thus, the corporation and LLC, with
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It is not possible to fully describ
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usiness corporation for all purpose
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a cash-basis taxpayer to be taxed a
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The Tax Reform Act of 1986 substant
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limit is the product of the value o
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he would have spent anyway. In fact
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protect Brad from the scenario of h
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paying for the privilege. If the st
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The second tax scenario attaches to
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include that nullity in his taxable
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then the capital gain to be taxed h
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Most relevant to Morris is Section
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To begin with, the ESOP will have t
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general partner of a limited partne
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small businesses) is also subject t
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oth Lisa and Brad would be free to
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Assume that a limited liability com
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corporations, and had been audited
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There is plenty of blame from the c
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• An important study about top ma
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• The federal government made at
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$79.7 million for other services, a
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Budgets offer a variety of benefits
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determine the impact of specific pr
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Exhibit 11.2 Budget variance report
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udget, we just add more to it next
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income statement. The financial bud
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For a manufacturing company, cost o
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C&G‟s Gift Shop has a policy to m
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Meeting cash obligations as they co
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was unusually low, say, due to the
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A fixed budget, sometimes called a
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A large part of the budget selling
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• Centralized resource allocation
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Merewitz, Leonard, and Stephen H. S
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This chapter starts with a discussi
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Interestingly the numbers for quart
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Exhibit 12.4 Scenarion analysis.
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Pitfalls Although this analytic tec
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Exhibit 12.6 Variable cost element
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Variable Cost as a Function of Outp
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If scenario 2 yields a lower profit
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Microsoft certainly does not price
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If it is determined that dumping ha
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Leaving government agencies and not
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transaction processing. Each proces
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Exhibit 13.3 E-commerce transaction
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To summarize the analysis, the busi
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Capacity costs are probably the mos
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which it was, but for the inventory
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They called this strategic cost man
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A closer study, however, revealed s
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the benefits of business planning.
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The last type of plan is called a d
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The Business Plan We will progress
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Hook the Reader That means having t
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Industry The goal of this section i
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upscale suburban client who wants p
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Company and Product Description Com
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Exhibit 14.8 shows the competitive
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Exhibit 14.9a Advertising schedule.
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Scope of Operations What is the pro
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Development Time Line A development
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By law, most organization types req
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As mentioned in the development pla
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that can be depreciated, you should
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1 Special thanks to Matt Feczko, Mi
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For better or worse, the business e
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Leeson bet and lost. Japanese stock
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Between February and April 1994, Da
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LTCM could be picky when it came to
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An investor who wished to invest in
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Similarly, the swaps market has rev
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speculator would suffer losses equa
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American manufacturer will suffer l
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The ease with which futures facilit
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Exhibit 15.1 Call option payoff dia
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Exhibit 15.2 Payoff diagram for a w
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Notice that the put option payoff r
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Bank, owns a large block of NASDAQ
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can be tailored so that the money r
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Finally, the last step is to choose
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3 Fischer Black, who co-invented th
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not include assets that the firm ha
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Thus, a business valuation will usu
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Negative • Acme is highly depende
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Exhibit 16.3 Acme Manufacturing, In
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Profitability ratios reflect the re
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When we talk about the value of a b
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This example illustrates that with
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Income Approach: Discounted Cash Fl
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Exhibit 16.5 Acme Manufacturing, In
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Victoria explains that the second p
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Victoria analyzes Acme‟s audited
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In summary, the discounted cash flo
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Adjustment for Illiquidity As previ
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51% position sells for a higher pri
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examples. The proper application of
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The subject of this chapter is grow
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Finally, an acquisition can be effe
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M&A activity has been the focus of
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companies continue to make the same
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equals was taking on a distinctive
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Anatomy of a Successful Acquirer: T
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employees kept their original jobs
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where ΔCF t is the incremental cas
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where it‟s ultimately buried. Suc
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The following example summarizes th
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make sure that you are at least awa
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acquisition, there is no immediate
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its vascular business, which was so
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While all employees should be part
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makes strategic and financial sense
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Bhagat, Sanjai, Ming Dong, David Hi
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The 2008 financial crisis underscor
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Source: Plunkett’s Outsourcing &
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To summarize: Trends • Large numb
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Companies are becoming increasingly
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What steps should a company follow
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• Results of meetings with vendor
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• Breach of contract and remedies
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Assuming the project or service rev
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The answer is: profits. The company
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19 Information Technology and You D
Page 527 and 528: People‟s lives have been turned u
Page 529 and 530: its self-contained rechargeable bat
Page 531 and 532: Random-Access Memory (RAM) Random-a
Page 533 and 534: On laptop computers and PDAs, the s
Page 535 and 536: Operating System An operating syste
Page 537 and 538: the spreadsheet software together w
Page 539 and 540: Exhibit 19.5 Pro forma sales and in
Page 541 and 542: Database Software A database is a c
Page 543 and 544: Internet e-mail addresses often con
Page 545 and 546: Personal Finance Software There are
Page 547 and 548: There are several different approac
Page 549 and 550: One of the major attractions of the
Page 551 and 552: While not a new version of the Web
Page 553 and 554: industrial revolution, and has occu
Page 555: Dummies Inc. has a series of books
Page 559 and 560: organization. This chapter is desig
Page 561 and 562: As technology has evolved, the term
Page 563 and 564: While the software mentioned earlie
Page 565 and 566: Most of the focus of the investor c
Page 567 and 568: Data Access and OLAP Before the lat
Page 569 and 570: Exhibit 20.5 illustrates a differen
Page 571 and 572: Productivity Tools Workers expect t
Page 573 and 574: Client-server technology is based o
Page 575: Today, most programmers write in C+
Page 579 and 580: No treatment of relational database
Page 581 and 582: Online analytical processing (OLAP)
Page 583 and 584: server) and the rest on the users
Page 585 and 586: the other operational departments w
Page 587: The world of business has changed d
Page 591: Chaffey, Dave, E-Commerce and E-Com
Page 595 and 596: According to the results of the sur
Page 597 and 598: understand the financial situation
Page 599 and 600: MBA graduates who are hoping to ent
Page 601 and 602: Summary Financial services opportun
Page 603 and 604: Let‟s begin with the “I left it
Page 605 and 606: MBA student: “Well, I go to [Grea
Page 607 and 608: Aiming for Your Goals For career ch
Page 609 and 610: Networking is generally regarded as
Page 611 and 612: Let‟s begin with some key assumpt
Page 613 and 614: like, or moving ahead in the compan
Page 618 and 619: Accrual accounting: An accounting m
Page 620 and 621: Cash flow: Cash that is spent or re
Page 622 and 623: Distribution channel: A chain of in
Page 624 and 625: Goodwill: As it relates to valuatio
Page 626 and 627:
Management’s discussion and analy
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Ordinary annuity: An annuity that p
Page 630 and 631:
Securities and Exchange Commission
Page 632 and 633:
Vertical merger: A merger in which
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about activity-based costing progre
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Application systems ARPAnet Arthur
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Bell Labs Benefit measurement Beta
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goal orientation legal and contract
Page 642 and 643:
segment information note share-base
Page 644 and 645:
process of purpose of real world us
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uy/build decision capital budget in
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written resume Careers in corporate
Page 650 and 651:
Cell Center for Research in Securit
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Compensation and ownership Competit
Page 654 and 655:
Corporate culture Corporate debt in
Page 656 and 657:
profit planning from an internal pe
Page 658 and 659:
Data Data access and OLAP Database
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Askin Capital Management Barings Ba
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market approach publicly traded gui
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Electronic data interchange (EDI) E
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Extensible markup language (XML) Ex
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short term liquidity users and uses
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Fourth generation programming (4GL)
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Going private Going private transac
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Hypertext links Hypertext markup la
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Information technology and the firm
Page 678 and 679:
International Accounting Standards
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Last-in-first out (LIFO) vs. curren
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Long call option payoff Longer-term
Page 684 and 685:
Market risks Market size and struct
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Motivation to outsource Multiple IR
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Nonrecurring items defined disclosu
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Operational complexity Operational
Page 692 and 693:
Outsourcing metrics Overhead Over-t
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Personal end game Personal expense
Page 696 and 697:
Price competition Price decreases P
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Projected cash flow statements Proj
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Relevant range Relevant range assum
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Risk sharing Risk transfer Risk vs.
Page 704 and 705:
Short call option payoff Short part
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Spot price Spreadsheet software Spr
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Summarizing nonrecurring items and
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acquisition the business dividends
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Timmon‟s Model of Opportunity Rec
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U.S. immigration quotas U.S. Intern
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discounting with discount rate form
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