The Goal

51

Lou puts a finger alongside his face and squints through his bifocals at his shoe .

"Well, you'd have to have some kind of absolute measure- ment," he says. "Something to tell you in dollars or yen or what- ever just how much money you've made."

"Something like net profit, right?" I ask.

"Yeah, net profit," he says. "But you'd need more than just that. Because an absolute measurement isn't going to tell you much."

"Oh yeah?" I say. "If I know how much money I've made, why do I need to know anything else? You follow me? If I add up what I've made, and I subtract my expenses, and I get my net profit-what else do I need to know? I've made, say, $10 million, or $20 million, or whatever."

For a fraction of a second, Lou gets a glint in his eye like I'm real dumb.

"All right," he says. "Let's say you figure it out and you come up with $10 million net profit... an absolute measurement. Offhand, that sounds like a lot of money, like you really raked it in. But how much did you start with?"

He pauses for effect.

"You see? How much did it take to make that $10 million? Was it just a million dollars? Then you made ten times more money than you invested. Ten to one. That's pretty goddamned good. But let's say you invested a billion dollars. And you only made a lousy ten million bucks? That's pretty bad."

"Okay, okay," I say. "I was just asking to be sure."

"So you need a relative measurement, too," Lou continues. "You need something like return on investment... ROI, some comparison of the money made relative to the money invested."

"All right, but with those two, we ought to be able to tell how well the company is doing overall, shouldn't we?" I ask.

Lou nearly nods, then he gets a faraway look.

"Well..." he says.

I think about it too.

"You know," he says, "it is possible for a company to show net profit and a good ROI and still go bankrupt."

"You mean if it runs out of cash," I say.

"Exactly," he says. "Bad cash flow is what kills most of the businesses that go under."

"So you have to count cash flow as a third measurement?"