CTO Budget & Financial Management Flashcards

Which budgeting approach allocates resources based on strategic priority rather than prior-year spend?

Answer: Zero-based budgeting

Zero-based budgeting requires justifying every line item from scratch each cycle, aligning spend directly to current strategic priorities.

A CTO presents a business case for a $5M platform modernization. Which metric best demonstrates financial value to the CFO?

Answer: Net Present Value (NPV)

NPV expresses the project's expected financial return in today's dollars, which is the most compelling metric for CFO-level investment decisions.

What is the primary purpose of a technology chargeback model?

Answer: Allocate IT costs transparently to business units

A chargeback model attributes technology costs to the consuming business units, promoting accountability and informed consumption decisions.

Which of the following best describes Total Cost of Ownership (TCO) for a software system?

Answer: All costs over the system's useful life including maintenance and support

TCO encompasses acquisition, implementation, ongoing maintenance, support, and eventual decommissioning costs across the full system lifecycle.

A CTO must reduce the IT OpEx budget by 15% without impacting critical services. What is the FIRST recommended action?

Answer: Conduct a portfolio rationalization to identify redundant tools and licenses

Portfolio rationalization quickly surfaces duplicate tools and unused licenses, delivering cost reduction with minimal operational risk.

Which financial concept helps a CTO justify IT investments by expressing returns as a percentage of the investment cost?

Answer: Return on Investment (ROI)

ROI divides net benefit by investment cost and expresses the result as a percentage, making it a universal metric for comparing technology investments.