Debt analysis Springfield Bank is evaluating Creek Enterprises, which has requested a $4,250,000 loan, to assess the firm's financial leverage and financial risk. On the basis of the debt ratios for Creek, along with the industry averages and Creek's recent financial statements, evaluate and recommend appropriate action on the loan request. Creek Enterprises Income Statement: X Industry averages Debt ratio Times interest earned ratio Fixed-payment coverage ratio 0.47 7.24 1.91 Data table Creek Enterprises Balance Sheet: CODED (Click the icon here in order to copy the contents of the data table below into a spreadsheet.) Creek Enterprises Income Statement for the Year Ended December 31, 2019 Sales revenue Creek Enterprises's debt ratio is (Round to two decimal places.) Less: Cost of goods sold $29,957,000 20,975,000 $8,982,000 Creek Enterprises's times interest earned ratio is (Round to two decimal places.) Gross profits Less: Operating expenses Selling expense $2,991,000 Creek Enterprises's fixed-payment coverage ratio is. (Round to two decimal places.) General and administrative expenses 1,842,000 Complete the following summary of ratios and compare Creek Enterprises's ratios vs. the industry average: (Round to two decimal places.) Lease expense 202,000 1,006,000 Depreciation expense Creek Industry 0.47 Total operating expense Debt ratio Times interest earned ratio 7.24 Fixed-payment coverage ratio 1.91 6,041,000 $2,941,000 1,015,000 $1,926,000 404,460 $1,521,540 94,875 $1,426.665 Do you agree or disagree with the decision below? Because Creek Enterprises has a much higher degree of indebtedness and much lower ability to service debt than the average firm in the industry, the loan should be rejected. Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate=21%) Net profits after taxes Less: Preferred stock dividends Earnings available for common stockholders Print Done (Click the icon here in order to copy the contents of the data table below into a spreadsheet.) Creek Enterprises Balance Sheet December 31, 2019 Assets Current liabilities Current assets Cash $981,000 Accounts payable $7,995,000 Marketable securities 2,963,000 Notes payable 7,955,000 Accounts receivable 11,987,000 Accruals 542,000 Inventories 7,548,000 Total current liabilities $16,492,000 Total current assets $23,479,000 Long-term debt (includes financial leases)** $19,923,000 Gross fixed assets (at cost)* Stockholders' equity Land and buildings $10,967,000 Preferred stock (25,300 shares, $3.75 dividend) $2,493,000 Machinery and equipment 20,544,000 Common stock (1.14 million Furniture and fixtures 8,041,000 shares at $4.50 par) 5,130,000 Gross fixed assets $39,552,000 Paid-in capital in excess of par value 3,971,000 Less: Accumulated depreciation 12,999,000 Retained earnings 2,023,000 Net fixed assets $26,553,000 Total stockholders' equity $13,617,000 Total liabilities and Total assets $50,032,000 stockholders' equity $50,032,000 *The firm has a 4-year financial lease requiring annual beginning-of-year payments of $202,000. Three years of the lease have yet to run. **Required annual principal payments are $847,000. Liabilities and Stockholders' Equity