3. PCA International, Inc., is one of the largest color portrait photogra- phy chains in North America. The company photographs, develops, and sells portrait packages through studios operated in Kmart stores. Following are selected financial data for the company for the period 1991-1995.

a. Calculate PCA's sustainable growth rate in each year.

b. Comparing the company's sustainable growth rate with its actual growth rate in sales, what growth problems did PCA face over this period?

c. How did the company cope with these problems?

d. In March 1995, PCA announced a $7.5 million stock buy back, about equal in size to earnings that year. From a growth manage- ment perspective, was this a wise move?

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1991 1992 1993 1994 1995 Profit margin (%) Retention ratio (%) 4.8 5.5 3.3 3.0 5.3 78.4 65.7 53.9 47.8 71.9 Asset turnover (X) 4.3 3.1 2.7 2.4 2.4 Financial leverage (x) 5.6 4.2 2.0 2.0 1.8 Growth rate in sales (%) 6.9 8.0 (6.2) (2.9) (0.1)