Debt analysis Springfield Bank is evaluating Creek Enterprises, which has requested a $4,470,000 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. Industry averages Creek Enterprises Income Statement: Debt ratio 0.44 Times interest earned ratio 7.27 Creek Enterprises Balance Sheet: Fixed-payment coverage ratio 2.03 Creek Enterprises's debt ratio is (Round to two decimal places.) Data table (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 $29,984,000 Sales revenue 21,009,000 Less: Cost of goods sold Gross profits $8,975,000 Less: Operating expenses Selling expense $3,050,000 General and administrative expenses 1,788,000 Lease expense 164,000 Depreciation expense 1,023,000 Total operating expense 6,025,000 Operating profits Less: Interest expense $2,950,000 1,007,000 Net profits before taxes Less: Taxes (rate = 21%) Net profits after taxes Less: Preferred stock dividends Earnings available for common stockholders $1,943,000 408,030 $1,534,970 106,250 $1,428,720 Data table (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 Liabilities and Stockholders' Equity Current assets Cash Current liabilities $1,039,000 Accounts payable $7,965,000 Marketable securities 2,979,000 Notes payable 7,980,000 Accounts receivable 11,953,000 Accruals 527,000 Inventories 7,471,000 Total current liabilities $16,472,000 Total current assets $23,442,000 Gross fixed assets (at cost)" Long-term debt (includes financial leases)** Stockholders' equity $20,095,000 Land and buildings $10,955,000 Preferred stock (25,000 Machinery and equipment 20,508,000 shares, $4.25 dividend) Common stock (1.02 million $2,510,000 Furniture and fixtures 8,010,000 shares at $4.75 par) 4,845,000 Gross fixed assets $39,473,000 Paid-in capital in excess of par value 3,987,000 Less: Accumulated depreciation 13,009,000 Retained earnings 1,997,000 Net fixed assets $26,464,000 Total stockholders' equity $13,339,000 Total liabilities and Total assets $49,906,000 stockholders' equity $49,906,000 "The firm has a 4-year financial lease requiring annual beginning-of-year payments of $164,000. Three years of the lease have yet to run. "Required annual principal payments are $751,000.