Nobility Homes, Inc., is a small maker of manufactured homes sold throughout the state of Florida. The following are selected financial data for the company for the period 2012–2016.

2012 2013 2014 2015 2016 Profit margin (%) 0.3 4.0 5.9 10.5 17.5 Retention ratio (%) 100.0 100.0 100.0 100.0 100.0 Asset turnover (X) 0.44 0.50 0.54 0.66 0.67 Financial leverage (X) 1.04 1.08 1.11 1.16 1.30 Growth rate in sales (%) 17.9 17.0 14.2 31.6 22.3 Source: Data from Nobility Homes 2012–2016 annual reports

a. Calculate Nobility Homes’ annual sustainable growth rate for the years 2012 through 2016.

b. Comparing the company’s sustainable growth rate with its actual growth rate in sales, what growth management challenge did Nobility Homes face over this period?

c. How did the company cope with this challenge?

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