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Revenue Management by Ronald Huefner

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CHAPTER 9

Revenue Management and the Theory of Constraints

Eli Goldratt popularized the theory of constraints (TOC) in his well-known instructional novel, The Goal. What he termed the TOC was a renewal and extension of the long-standing scarce resource problem in economics. The TOC concept offers insight into some revenue decisions and also expands the capacity concepts discussed in the preceding chapter.

TOC Financial Measurement System

A very lean financial measurement system is one of the features of TOC. Goldratt argued that managers should focus on three measures, which he named throughput, inventory, and operational expense.

Throughput represents what the company generates through sales. It is typically measured as the revenue value of ...

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