TEAM LinG T HE V EST P OCKET G UIDE T O I NFORMATION T ECHNOLOGY Second Edition ffirst.fm Page i Thursday, August 4, 2005 5:46 PM ffirst.fm Page ii Thursday, August 4, 2005 5:46 PM T HE V EST P OCKET G UIDE T O I NFORMATION T ECHNOLOGY Second Edition Jae K. Shim, Ph.D. Chief Financial Officer NBRF Incorporated Professor of Accounting and Finance California State University, Long Beach Joel G. Siegel, Ph.D., CPA Financial Consultant Professor of Accounting and Finance Queens College of the City University of New York John Wiley & Sons, Inc. ffirst.fm Page iii Thursday, August 4, 2005 5:46 PM This book is printed on acid-free paper. Copyright © 2005 by John Wiley & Sons, Inc. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. 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For general information on our other products and services, or technical support, please contact our Customer Care Department within the United States at 800-762-2974, outside the United States at 317-572-3993 or fax 317-572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in elec- tronic books. For more information about Wiley products, visit our Web site at http://www.wiley.com. Library of Congress Cataloging-in-Publication Data: Shim, Jae K. The vest pocket guide to information technology / Jae K. Shim, Joel G. Siegel 2nd ed. p. cm. Includes index. ISBN-13 978-0-471-72500-8 ISBN-10 0-471-72500-5 (pbk.) 1. Information technology—Handbooks, manuals, etc. 2. Management information systems—Handbooks, manuals, etc. I. Siegel, Joel G. II. Title. T58.5.S54 2005 658.4’038 dc22 2005043953 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 ffirst.fm Page iv Thursday, August 4, 2005 5:46 PM v A BOUT THE A UTHORS Jae K. Shim, Ph.D., is a Professor of Business Administra- tion at California State University, Long Beach. Dr. Shim received his MBA and Ph.D. degrees from the University of California at Berkeley (Haas School of Business). He is the President of the National Business Review Foundation, a management and computer consulting firm. Dr. Shim has published about 50 articles in professional journals, includ- ing Journal of Systems Management, Financial Management, Journal of Operational Research, Omega, Data Management, Management Accounting, Simulation and Games, Long Range Planning, Journal of Business Forecasting, Decision Sciences, Management Science, and Econometrica. Dr. Shim has over 50 books to his credit and is a recipient of the 1982 Credit Research Foundation Outstanding Paper Award for his arti- cle on financial modeling. He is also a recipient of a Ford Foundation Award, Mellon Research Fellowship, and Arthur Andersen Research Grant. Dr. Shim has been for over 20 years an industrial consultant in the areas of infor- mation systems development and applications, corporate planning modeling, business forecasting, and financial modeling. Joel G. Siegel, Ph.D., CPA, is a computer consultant to businesses and Professor of Accounting, Finance, and Infor- mation Systems at Queens College of the City University of New York. He was previously associated with Coopers and Lybrand, CPAs, and Arthur Andersen, CPAs. He served as a consultant to numerous organizations including Citicorp, International Telephone and Telegraph, Person-Wolinsky Associates, and the American Institute of CPAs. Dr. Siegel is the author of 50 books. His books have been published by Prentice Hall, Richard Irwin, McGraw-Hill, Harper- Collins, John Wiley, Macmillan, Probus, International Pub- lishing, Barron’s, and the American Institute of CPAs. He has authored approximately 200 articles on business topics including many articles in the area of computer applications to business. His articles have appeared in various journals including Computers in Accounting, Decision Sciences, Financial Executive, Financial Analysts Journal, The CPA Journal, National Public Accountant, and Practical Accountant. ffirst.fm Page v Thursday, August 4, 2005 5:46 PM vi About the Authors In 1972, he received the Outstanding Educator of America Award. Dr. Siegel is listed in Who’s Who Among Writers and Who’s Who in the World. Dr. Siegel is the former chair- person of the National Oversight Board. ffirst.fm Page vi Thursday, August 4, 2005 5:46 PM vii H OW T HIS B OOK C AN H ELP Y OU The book covers information systems in all phases of busi- ness and in all functional areas to analyze and solve busi- ness problems in the real world. The practical and efficient use of computer technology, both software and hardware, is highlighted. All types of business applications are covered. The importance of databases, networking, and telecom- munications is clearly presented. Popular accounting, tax, finance, management, manufacturing, and marketing soft- ware is explained for easy use. Software for decision sup- port systems (DSSs), executive information systems (EISs), and artificial intelligence (AI) (e.g., financial modeling, bud- geting, strategic planning and control, forecasting, data analysis, inventory planning, and optimization software) is covered with real-life examples. What-if analysis and the effects of changing assumptions are discussed. The purpose of the book is to provide a wealth of current and essential information to managers in all types of orga- nizations so that they may make optimum decisions. It gives the businessperson all he or she needs to know in the computerized financial application and modeling environ- ment. Emerging trends in information technology are antici- pated and discussed. In other words, expected developments in computers are presented so that managers can properly plan ahead. The professional success of a business manager depends on keeping abreast of the latest thinking and appli- cations in information technology. This surely gives a com- petitive edge. The book is written for business professionals in a prac- tical, reader-friendly manner including clear illustrations. We have simplified difficult computer terminology and usage. Important topics include management information systems (MISs), selection of the best software and hardware for particular applications, business application software (e.g., accounting, finance, management, tax, marketing, and manufacturing), databases, telecommunications and online services (e.g., Internet, AOL, MSN, Dow Jones, Westlaw, AICPA), and computer security and auditing. The latest multimedia trends are covered. New developments in artifi- cial intelligence and expert systems, decision support sys- tems, and executive information systems are covered. ffirst.fm Page vii Thursday, August 4, 2005 5:46 PM viii How This Book Can Help You The audience for this book includes accountants, tax pre- parers, financial managers, general managers, marketing executives, production/operations managers, purchasing managers, personnel managers, business analysts, forecast- ers, budget analysts, chief financial officers (CFOs), chief executive officers (CEOs), chief operating officers (COOs), chief information officers (CIOs), chief technology officers (CTOs), project managers, consultants, systems analysts, and computer support staff. Businesspeople in large, medium, and small companies will benefit. Private and nonprofit enti- ties will find the material of equal value. The following are some representative topics, among others discussed in the book, of vital interest to business- people: ❍ ❍❍ ❍ Strategic uses of the information system and techno- logy. ❍ ❍❍ ❍ The use of software in planning and control. ❍ ❍❍ ❍ The applications of telecommunication technologies and how digitized computer signals can take advan- tage of these technologies. ❍ ❍❍ ❍ Accounting and information systems and packages showing how applications can be made to record keep- ing, reporting, and financial statement presentation. ❍ ❍❍ ❍ The Sarbanes-Oxley compliance software ❍ ❍❍ ❍ An explanation of what a decision support system (DSS) is about and how it is useful to business deci- sion makers to improve the quality of their analysis and evaluation. It improves problem solving. ❍ ❍❍ ❍ The use of artificial intelligence and expert systems in making decisions. ❍ ❍❍ ❍ Computerized security (e.g., protecting files, service contracts, backups, insurance coverage, and security devices). It includes preventing fraud. ❍ ❍❍ ❍ Database management involving organizing and managing information so that it can be retrieved and utilized in an effective and efficient way. ❍ ❍❍ ❍ What a management information system (MIS) is, and what its applications and benefits are. ❍ ❍❍ ❍ The use of online databases (e.g., World Wide Web, Dow Jones, Westlaw, Lexis) in making business deci- sions. ❍ ❍❍ ❍ The use of the Intranet within a company as an impor- tant information source. ❍ ❍❍ ❍ Available accounting and financial software and how they improve financial reporting and analysis. ❍ ❍❍ ❍ The use of networking to operate smarter and be more efficient in a computer environment. ❍ ❍❍ ❍ The use of computer conferencing. ❍ ❍❍ ❍ Financial modeling and what-if analysis in budget- ing, forecasting, and general decision making. ffirst.fm Page viii Thursday, August 4, 2005 5:46 PM How This Book Can Help You ix ❍ ❍❍ ❍ Manufacturing information systems packages to aid in inventory record keeping, inventory management and control, and production planning. ❍ ❍❍ ❍ Executive information systems (EISs). ❍ ❍❍ ❍ Marketing information systems to aid in sales plan- ning, sales forecasting, market research, and advertis- ing effectiveness. ❍ ❍❍ ❍ Selecting the best hardware for the particular applica- tion needs and to enhance productivity. ❍ ❍❍ ❍ Value chain management software. Chapter 1 discusses what management information sys- tems are about and presents MIS techniques. The different types of MISs are explained, including when each type would be most appropriate. Chapter 2 covers MISs in busi- ness decision making and explains decision models. Chapter 3 introduces basic hardware components and how to buy the “right” hardware combination for each user’s require- ments. Chapter 4 presents systems software and explains the functions and terminology of different types of systems soft- ware. Chapter 5 covers application software and how such software can be used to improve profitability and enhance productivity. Chapter 6 discusses the use of database soft- ware, including query languages. Chapter 7 presents data communications. Chapter 8 discusses the different types of online databases and the information available on them. State-of-the-art communication technologies and popular network applications are also presented. Chapter 9 discusses how to use an Intranet within the business. Chapter 10 pre- sents accounting, audit, and tax software and their business applications. Chapter 11 shows how MISs can be applied to financial management to improve the management of assets and liabilities, and to help plan the financing of debt and equity. The role of the MIS in forecasting is also explained. Chapter 12 discusses manufacturing information systems and packages. It includes applications to production plan- ning so as to improve manufacturing activity and inventory management. Marketing information systems and packages are presented in Chapter 13. The chapter shows how soft- ware is used in marketing management, sales planning, and advertising effectiveness. The use of decision support systems (DSSs) to aid in management decision making by making it more accurate and reliable is the subject of Chap- ter 14. Chapter 15 deals with the use of artificial intelli- gence software to imitate the human mind process. It aids in managerial analysis and decision making. Chapter 16 is directed toward computer security and auditing. It pre- sents protective data systems and information technology to safeguard the integrity of information. Ways to prevent misappropriation of resources and fraudulent transactions are enumerated. ffirst.fm Page ix Thursday, August 4, 2005 5:46 PM [...]... Databases • 10 7 Nine The Intranet Intranet Explosion • 11 1 Calendar-Driven Versus Event-Driven Strategy • 11 1 Intranets Reduce Cost, Time to Market • 11 2 Practical Applications • 11 2 Hypertext Markup Language (HTML) • 11 4 Common Gateway Interface (CGI) • 11 5 Setting up an Intranet • 11 6 Proposed Content • 11 6 11 0 Contents xix Enhancements • 11 6 Intranets Compared to Groupware • 11 7 Ten Accounting Packages... Software • 11 9 Module Descriptions • 11 9 General Ledger • 11 9 Accounts Receivable and Invoicing • 12 0 Accounts Payable and Purchase Order Processing • 12 0 Inventory • 12 0 Payroll • 12 0 Job Costing • 12 1 Fixed Assets • 12 1 Market Leaders • 12 1 High-End Packages • 12 1 Midlevel Packages • 12 3 Low-End Packages • 12 4 Checklist for Selecting Accounting Software • 12 5 Write-Up Software • 12 6 Major Players • 12 6... Software • 211 Sales & Market Forecasting Toolkit • 211 Forecast! GFX • 211 ForeCalc • 212 StatPlan IV • 212 Geneva Statistical Forecasting • 212 SmartForecasts • 213 Tomorrow • 213 Forecast Pro • 214 MicroTSP • 214 Sibyl/Runner • 214 Other Forecasting Software • 215 General-Purpose Statistical Software • 215 Fourteen Decision Support Systems 216 Distinguishing Among TPS, MIS, EIS, DSS, and ES • 216 Decision... Risks of Outsourcing • 10 xi 1 xii Contents What is the Role of the Information Systems in the Development of the Strategic Plan? • 11 Two Management Information Systems and Decision-Making Models 13 What is the Management Information System (MIS)? • 13 Management • 14 Planning • 14 Organizing and Coordinating • 14 Controlling • 14 Decision Making • 14 Information • 14 Systems • 15 Classifying Management... • 17 6 Up Your Cash Flow • 17 6 Cash Collector • 17 7 Cash Flow Analysis • 17 7 CapPLANS • 17 7 Project Evaluation Toolkit • 17 7 @Risk • 17 7 What’s Best! • 17 8 Inventory Analyst • 17 8 The Latest Generation of Budgeting and Planning (B&P) Software • 17 8 Budget Express • 17 8 Twelve Manufacturing Information Systems and Packages Models of the Manufacturing Information System • 18 1 Product Engineering • 18 1... Forecasting • 16 9 Short-Term Decisions • 17 0 Long-Term Asset Decisions • 17 1 Long-Term Financing Decisions • 17 1 Popular Budgeting and Planning Software • 17 2 Adaytum Planning • 17 2 Budget Maestro Version 5.8 • 17 3 Microsoft Business Solutions for Analytics—Forecaster • 17 4 Host Budget Version 3.2 • 17 4 SRC Systems • 17 5 SRC Budgeting • 17 5 SRC Sales Planning • 17 5 SRC Forecasting • 17 6 ProPlans • 17 6 Profit... with Z-score • 15 8 How to Use Prediction Models • 15 8 Z-Score Model • 15 9 More Applications of the Z-Score • 16 0 Words of Caution • 16 0 Forecasting External Financing Needs The Percent-of-Sales Method • 16 4 Financial Modeling Languages • 16 6 Financial Analysis with Spreadsheets • 16 6 Financial Ratio Analysis • 16 7 Maximum Versus Minimum Profits • 16 8 Choice of Depreciation Method • 16 8 14 5 Contents xxi... and Scheduling • 18 2 Improvement Approach • 18 2 Construction Approach • 18 2 Simulation Approach • 18 3 Fabrication • 18 3 Job-Shop Production • 18 3 Process (Flow-Shop) Production • 18 3 Quality Control Management • 18 3 Manufacturing Intelligence • 18 4 Expert Systems in Manufacturing • 18 4 18 1 xxii Contents Expert System Knowledge Bases • 18 5 Benefits and Limitations of Expert Systems • 18 5 Robotics in... Network • 13 9 Implementation • 13 9 Business Processes • 14 0 Hardware and Software • 14 0 Support • 14 0 11 8 xx Contents Supply-Chain Management (SCM) Systems • 14 1 Customer Relationship Management Systems (CRM) • 14 1 Compliance Software • 14 3 Technologies That Can Assist with Compliance • 14 3 Eleven Financial Management Information Systems and Packages A Financial Management Information System • 14 5 Inputs... System • 14 5 Inputs to the Financial Management Information System • 14 6 Corporate Strategic Goals and Policies • 14 6 The Transaction Processing System • 14 6 External Sources • 14 7 Financial MIS Subsystems and Outputs • 14 7 Financial Forecasting • 14 7 Profit/Loss and Cost Systems • 14 8 Financial Intelligence • 14 8 Funds Management • 15 0 Financial Budgeting, Planning, and Control • 15 1 Forecasting Financial . Databases • 10 7 Nine The Intranet 11 0 Intranet Explosion • 11 1 Calendar-Driven Versus Event-Driven Strategy • 11 1 Intranets Reduce Cost, Time to Market • 11 2 Practical Applications • 11 2 Hypertext. Processing • 12 0 Inventory • 12 0 Payroll • 12 0 Job Costing • 12 1 Fixed Assets • 12 1 Market Leaders • 12 1 High-End Packages • 12 1 Midlevel Packages • 12 3 Low-End Packages • 12 4 Checklist. Compared to Groupware • 11 7 Ten Accounting Packages 11 8 Accounting Software • 11 9 Module Descriptions • 11 9 General Ledger • 11 9 Accounts Receivable and Invoicing • 12 0 Accounts Payable and