4. Table 3.1 in the last chapter represents R&E Supplies' financial statements for the period 2014 through 2017, and Table 3.5 presents a pro forma financial forecast for 2018. Use the information in these tables to answer the following questions. a. Calculate R&E's sustainable growth rate each year from 2015 through 2018. b. Comparing the company's sustainable growth rate with actual and projected growth rates in sales over these years, what growth management problems does R&E appear to face in this period? I c. How did the company cope with these problems? Do you see any difficulties with the way it addressed its growth problems over this period? If so, what are they? d. What advice would you offer management regarding managing future growth? TABLE 3.1 Financial Statements for R&E Supplies, Inc., December 31, 2014-2017 ($ thousands 2015 $13,764 11,699 2,065 2016 $16,104 13,688 2,416 2017 $20,613 17,727 2,886 Income Statements 2014 Net sales $11,190 Cost of goods sold 9,400 Gross profit 1,790 Expenses: General, selling, and administrative expenses 1,019 Net interest expense 100 Earnings before tax 671 Tax 302 Earnings after tax $ 369 2,267 90 1,239 103 723 325 398 1,610 110 696 313 383 529 238 291 $ $ $ Balance Sheets $ $ $ 671 1,343 551 $ 644 1,7892,094 1,376 1.932 412 2.886 2,267 1,119 12 15 14 3,147 128 $ 3,275 3,728 124 3,852 4,685 295 $ 4,980 5,583 287 $ 5,870 Assets Current assets: Cash and securities Accounts receivable Inventories Prepaid expenses Total current assets Net fixed assets Total assets Liabilities and Owners' Equity Current liabilities: Bank loan Accounts payable Current portion long-term debt Accrued wages Total current liabilities Long-term debt Common stock Retained earnings Total liabilities and owners' equity $ 50 $ 1,443 50 $ 50 1,007 60 5 1,122 960 150 1,043 $ 3,275 $ 2.426 50 10 2,536 860 150 1,434 $ 4,980 50 3,212 100 18 3,380 760 1.550 910 150 1,242 $ 3,852 150 1,580 $ 5,870 Estimate TABLE 3.5 Forecasting with a Spreadsheet: Pro Forma Financial Forecast for R&E Supplies, Inc., December 31, 2018 ($ thousands) B co 2017 Actual $20,613 2018 2019 7 Year Net sales Growth rate in net sales Cost of goods soldet sales Gen., sell, and admin, expenseset sales Long-term debt Current portion long-term debt Interest rate Tax rate Dividend/earnings after tax 1 12 Current assetset sales 13 Net fixed assets Current liabilitieset sales 15 | Owners' equity 16 INCOME STATEMENT $ $ 760 100 10 25.0% 86.0% 12.0% $660 $100 10.0% 45.0% 50.0% 29.0% $280 14.5% $ 1,730 18 19 20 forecast 2019 Year Net sales Cost of goods sold Gross profit Gen., sell, and admin. exp. Interest expense Earnings before tax Tax Earnings after tax Dividends paid Additions to retained earnings Equations 2018 =B3+ B3 C4 = C5 C19 =C19-C20 = C6 C19 = C9'(C7 + C8 + C40) =C21 - C22 - C23 = C10'C24 =C24-C25 = C11'C26 =C26-27 Forecast 2018 $25,766 22,159 3,607 3,092 231 285 128 156 78 78 29 =C12C19 =C13 =C31 +232 7,472 280 7.752 30 BALANCE SHEET 131 Current assets 32 Net fixed assets 33 Total assets 34 35 Current liabilities 36 Long-term debt 37 Owners' equity 38 Total liabilities and owners' 39 equity 40 EXTERNAL FUNDING REQUIRED = C14'C 19 =C7 =B15 + C28 =C35 + C36 + C37 3.736 660 1,808 6.204 =C33-038 $ 1,548