Table 3.1 in the previous chapter presents financial statements for R&E Supplies for the period 2018 through 2021, and Table 3.5 presents a proforma financial forecast for 2022. Use the information in these tables to answer the following questions.

1. Calculate R&Es sustainable growth rate in each year from 2019 through 2022.
2. Comparing the companys sustainable growth rate with its actual and projected growth rates in sales over these years, what growth management problems does R&E appear to face in this period?
3. 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?
4. What advice would you offer management regarding managing future growth?

ABLE 3.1 Financial Statements for R\&E Supplies. Inc.. December 31. 2018-2021 (S thousands) TABLE 3.5 Forecasting with a Spreadsheet: Pro Forma Financial Forecast for R\&E Supplies, Inc., December 31, 2022 (\$ thousands) \begin{tabular}{|c|c|c|c|c|} \hline & A & B & C & D \\ \hline \multicolumn{5}{|l|}{1} \\ \hline 2 & Year & 2021 Actual & 2022 & 2023 \\ \hline 3 & Net sales & $20,613 & & \\ \hline 4 & Growth rate in net sales & & 25.0% & \\ \hline 5 & Cost of goods soldet sales & & 86.0% & \\ \hline 6 & Gen., sell., and admin. expenseset sales & & 12.0% & \\ \hline 7 & Long-term debt & $760 & $660 & \\ \hline 8 & Current portion long-term debt & $100 & $100 & \\ \hline 9 & Interest rate & & 10.0% & \\ \hline 10 & Tax rate & & 25.0% & \\ \hline 11 & Dividend/earnings after tax & & 50.0% & \\ \hline 12 & Current assetset sales & & 29.0% & \\ \hline 13 & Net fixed assets & & $280 & \\ \hline 14 & Current liabilitieset sales & & 14.5% & \\ \hline 15 & Owners' equity & $1,730 & & \\ \hline 16 & \multirow[t]{3}{*}{ INCOME STATEMENT } & \multirow{3}{*}{\begin{tabular}{c} Equations \\ 2022 \end{tabular}} & & \multirow{3}{*}{\begin{tabular}{c} Forecast \\ 2023 \end{tabular}} \\ \hline 17 & & & Forecast & \\ \hline 18 & & & 2022 & \\ \hline 19 & Net sales & =B3+B3C4 & $25,766 & \\ \hline 20 & Cost of goods sold & =CC19 & 22,159 & \\ \hline 21 & Gross profit & =C19C20 & 3,607 & \\ \hline 22 & Gen., sell., and admin. exp. & =C6C19 & 3,092 & \\ \hline 23 & Interest expense & =C9(C7+C8+C40) & 228 & \\ \hline 24 & Earnings before tax & =C21C22C23 & 287 & \\ \hline 25 & Tax & =C10C24 & 72 & \\ \hline 26 & Earnings after tax & =C24C25 & 216 & \\ \hline 27 & Dividends paid & =C11C26 & 108 & \\ \hline 28 & Additions to retained earnings & =C26C27 & 108 & \\ \hline 29 & & & & \\ \hline 30 & BALANCE SHEET & & & \\ \hline 31 & Current assets & =C12C19 & 7,472 & \\ \hline 32 & Net fixed assets & =C13 & 280 & \\ \hline 33 & Total assets & =C31+C32 & 7,752 & \\ \hline 34 & & & & \\ \hline 35 & Current liabilities & =C14C19 & 3,736 & \\ \hline 36 & Long-term debt & =C7 & 660 & \\ \hline 37 & Owners' equity & =B15+C28 & 1,838 & \\ \hline 38 & Total liabilities and owners' equity & =C35+C36+C37 & 6,234 & \\ \hline 39 & & & & \\ \hline 40 & EXTERNAL FUNDING REQUIRED & =C33C38 & $1,518 & \\ \hline \end{tabular}