Final answer:
True, Information Technology can indeed be an asset or a liability depending on how it adds value or incurs costs to a firm. In a bank's balance sheet, IT systems that contribute to efficient operations are assets, while failing systems that disrupt service can become liabilities.
Step-by-step explanation:
True, Information Technology (IT) can be either an asset or a liability. An asset is an item of value that a firm or an individual owns, such as cash, property, or IT infrastructure, which can be used to generate revenue or provide competitive advantages. Conversely, IT can be a liability if it leads to substantial costs without delivering the expected value or if it becomes obsolete and requires replacement. An asset-liability time mismatch occurs when customers can withdraw a firm's liabilities in the short term while it takes longer to repay its assets, a situation that could be exacerbated by failing IT systems.
A bank's balance sheet, an accounting tool that lists assets and liabilities, clearly illustrates this concept. Bank capital, which is a bank's net worth, is found by subtracting its total liabilities from its total assets. If IT systems strengthen the bank's ability to generate income through efficient services, they are an asset. Should these systems fail, creating disruptions in service or requiring expensive updates, they become a liability.
In summary, the reliance on IT systems in business, as depicted in Figure 8.7, where a failing phone or computer can have impacts on customers and revenues, further underscores the dual potential of IT as both an asset and a liability.