Question

Problem 9-43 Budgeting; Financial Objec- tives; Ethics (LO 9-1, 9-5, 9-6, 9-7) 2. Increase in sales: 11.5% Healthful Foods Inc., a manufacturer of breakfast cereals and snack bars, has experienced several years of steady growth in sales, profits, and dividends while maintaining a relatively low level of debt. The board of directors has adopted a long-run strategy to maximize the value of the shareholders' invest- ment. In order to achieve this goal, the board of directors established the following five-year financial objectives. Increase sales by 12 percent per year. Increase income before taxes by 15 percent per year. Maintain long-term debt at a maximum of 16 percent of assets. • These financial objectives have been attained for the past three years. At the beginning of last year, the president of Healthful Foods. Andrea Donis. added a fourth financial obiective of maintaining cost

I only need help with the #2 below:

Answer 1

Objective Attained / Not Attained Calculations 1 Increase sales by 12 percent per year Not Attained Increase in budgeted sales = ($947,750 - $850,000) / $850,000 = 11.5% Therefore, sales are increased by 11.50' percent instead of 12 percent. 2 Increase income before taxes by 15 percent per year Attained Increase in Income before taxes = ($120,750 - $105,000) / $105,000 = 15% Therefore, income before taxes is increased as required. 3 Maintain long term debt at a maximum of 16 percent of assets. Attained Long term debt to assets = $308,000 / $2,050,000 = 15.02% Therefore, long term debts are within the criteria of 16%.