Firm Profitability

Data Analytics for Decision Making

1. • AIS provides high-quality data, which accountants can analyze to address management's questions. This analysis helps in targeting the firm's most profitable products, optimizing pricing strategies, and predicting demand to minimize inventory costs.

Cost Reduction

1. • AIS helps in tracking and reducing costs by optimizing inventory levels, logistics, storage, and procurement processes. For example, a supply chain management system integrated with AIS ensures that inventory is available at the right place and time, reducing obsolescence and associated costs.

Revenue Enhancement

1. • Customer Relationship Management (CRM) systems, part of AIS, help attract new customers and retain existing ones by providing insights into customer preferences and behaviors, leading to increased sales revenue. Analytics performed on CRM data can identify the most profitable customers, allowing firms to focus on those relationships.

Efficiency in Support Processes

1. • Enterprise systems within AIS can automate support processes, reducing the costs associated with sales, general, and administrative expenses (SG&A). Efficient Human Resource Management Systems (HRMS) ensure optimal allocation of employees to critical tasks, enhancing productivity and cost-efficiency.

Impact on Stock Prices

Improved Financial Performance

1. • Academic studies indicate a positive association between AIS investment and subsequent accounting earnings, such as return on assets and return on sales. These improvements in profitability are reflected in the firm's financial performance, which can boost investor confidence and stock prices.

Stock Market Response

1. • Research has found that the implementation of supply chain information systems, which are a part of AIS, leads to improvements in profitability and positive stock returns. The market responds favorably to the efficiency gains and cost reductions brought about by AIS, reflecting these improvements in stock prices.