Question

after reading the book 'The Goal by Eliyahu M. Goldratt and Jeff Cox'

Answer

3. What are the three indicators given in the book to measure whether a factory makes money? Do you think these three indicators are reasonable? Is there any conflict with your accounting knowledge? Give your opinions and reasons.

Answer 1

The three indicators given in the book to measure whether a factory makes money are as follows-
1. Net profit
2. Return on investment
3. Cash flow
These three should always be increasing all the time if the business wants to grow and make money.
According to me these factors are good indicators to measure the overall profitability of the company.
There is no conflict with my accounting knowledge. These three indicators which are mentioned above a reasonably good indicators of a business financial position. The basic purpose of operating a business is, a business should always analyze the fact that they are selling more products this can be done in many ways such as their market share is continuously increasing, their product is performing better than the competitors,they launch new products which are selling more of in good numbers. The business should always keep in check whether their current expense is also going down as the business is always changing its new technologies which enable business in reducing their expenses. The company should always keep in check whether the inventory is going down. These days techniques such as just in time is useful in analyzing the inventory and help in reducing the unnecessary inventory which company has.
In short all the three indicators which are mentioned above are good indicators of measuring weather a factory makes money or not.
Please like this answer by giving it up vote. It motivates me to do good work. I also hope that you work hard and become the best student of your your class.