The Value Game

Three Rules of Goldratt

Increase
Throughput (T)
Maal-Saaman

Reduce (OE)
Operating Expenses
Kharchaa-Paani

Reduce Investments
(I)
Uggraani

T = (P-VC)*V
Throughput (T) is the rate at which the system
produces "goal units." When the goal units are
money.(in for-profit businesses), throughput is net
sales (S) less totally variable cost (TVC), generally
the cost of the raw materials (T = S TVC).
OE= FC+ INT+D-OI
Operating Expense (OE) is the money the system
spends in generating "goal units." For physical
products, OE is all expenses except the cost of the
raw materials. OE includes maintenance, utilities,
rent, taxes and payroll.
I = WC+Capex-Dividend/Buybacks
Investment (I) is the money tied up in the system.
This is money associated with inventory (valued
excl. overheads allocations), machinery, buildings,
and other assets and liabilities.

Sales are Sanity.Profits are Vanity..Cash is Reality

Sanjee

Ratio Analysis

One Ratio ROE Says it all

PAT
ROE= ------------Net Worth

Assets
Leverage = ------------Net Worth

PAT
Profitability = ------------Sales
Sales
Asset Eff.= ------------Assets

EBIT
Margin.=------------Sales

PAT
Profit Conversion.= ---------EBIT

Assets
Leverage = ------------Net Worth

EBIT

Capital
Structure

ROCE
Sales
Asset Eff.= ------------Assets

Sanjee

ER

rceptions-To-Earnings

Ratio

Performance
Consistency

PER

MANAGEMENT

Earning Power
and Quality

Risk

Management
nderstand The Interdependence of PER and RoE

Sanjee