Question
Herbal Essentials operates at 80% of fixed asset capacity. Use the financial statements below to answer the following questions. Herbal Essentials 2019 Income Statement Sales
Herbal Essentials operates at 80% of fixed asset capacity. Use the financial statements below to answer the following questions.
| Herbal Essentials 2019 Income Statement | |
| Sales | $750,000 |
| Costs | $600,000 |
| Taxable income | $150,000 |
| Taxes (34%) | $51,000 |
| Net income | $99,000 |
| Dividends | $37,500 |
| Addition to R/E | $61,500 |
| Herbal Essentials - Balance Sheet December 31, 2019 | |||
| Assets | Liabilities | ||
| Current assets | $200,000 | Current liabilities | $80,000 |
| Net fixed assets | $640,000 | Long-term debt | $320,000 |
| Owners' equity | $440,000 | ||
| Total assets | $840,000 | Total liabilities & equity | $840,000 |
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- Calculate the companys full capacity sales.
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- Determine whether or not Herbal Essentials will have to invest in net fixed assets based on a projected increase in sales of 10% for 2020.
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- What is the maximum growth rate that Herbal Essences can achieve with its current level of fixed assets.
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The New Finance Overreaction Complexity And Their Consequences
Authors: Robert A. Haugen
4th International Edition
0132775875, 9780132775878
