Using the data set in column B., perform a Sensitivity Analysis on your Forecast 2023 assuming a change in COGS/Net Sales. Net Sales for Sensitivity 2023 is based on Forecast 2022 Net Sales. How does R&E's projected external funding required change if the ratio of cost of goods sold to net sales declines from 86.0 percent to 84.0 percent? answer and observation in Box B.

Data Set - R&E SUPPLIES
Facts and assumptions ($ thousands)
			A.	B.	C.
	Actual	Forecast	Forecast	Sensitivity	Scenario
	2021	2022	2023	2023	2023
Net sales	$20,613				5%
Growth rate in sales		25%	30%
Cost of goods sold/net sales		86%	86%	84%	88%
Gen., sell., and admin. expense/net sales		12%	11%
Long-term debt	$760	$660	$560
Current portion long-term debt	$100	$100	$100
Interest rate		10%	10%
Tax rate		45%	45%
Dividend/earnings after tax		50%	50%
Current assets/net sales		29%	29%		35%
Net fixed assets		$280	$270
Current liabilities/net sales		14.5%	14.4%
Owners' equity	$1,730
INCOME STATEMENT ($ thousands)
		Forecast	Forecast	Sensitivity	Scenario
Year		2022	2023	2023	2023
Net sales		$25,766
Cost of goods sold		22,159
Gross profit		3,607		-	-
General, selling, and administrative expense	3,092		-	-
Interest expense		231		66	66
Earnings before tax		285		(66)	(66)
Tax		128		(30)	(30)
Earnings after tax		156		(36)	(36)
Dividends paid		78		(18)	(18)
Additions to retained earnings		78		(18)	(18)
BALANCE SHEET ($ thousands)
Current assets		$7,472		$0
Net fixed assets		280		270	270
Total assets		7,752	-	270	270
Current liabilities		3,736		-	-
Long-term debt		660		560	560
Equity		1,808		1,790	1,790
Total liabilities and owners' equity		6,204	-	2,350	2,350
External funding required		$1,548

Answer rating: 100% (QA)

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