When translating the word 'sie', how do I know when if it means you/she/they/etc.?
The sentence for "I know that she is good" would be "Ich weiss, dass sie gut ist." (Note the word order in the clause "that she is good." Word order in German subordinate clauses is different from the way it is for English.
Now if you want to say "I know that you are good," you would write "Ich weiss, das Sie gut ist." Note that the sentences are pronounced the same, but in its written form, German uses the capitalized form "Sie" to indicate "you."
Now "sie" also means "they." In the sentence "Sie ist gut," You know that it means "She is good because "ist" is in the third person singular. In the sentence "Sie sind gut" You know that "sie" means "they" because "sind" is the plural form of the third person in German,
Note that English has corresponding singular and plural forms (the book is good)/(the books are good).
German has much more of this kind of grammatical machinery than English does, and this makes it rather hard to learn for native speakers of English.