Financial Analysis Tools
Part C of the Systems Analyst’s Toolkit explains how to use three main cost analysis
tools: payback analysis, return on investment (ROI), and net present value (NPV).
Payback analysis determines how long it takes an information system to pay for itself
through reduced costs and increased benefits.Return on investment (ROI)is a percentage rate that compares the total net benefits (the return) received from a project to the
total costs (the investment) of the project. The net present value (NPV) of a project is the
total value of the benefits minus the total value of the costs, with both costs and benefits
adjusted to reflect the point in time at which they occur.