Debt analysis Springfield Bank is evaluating Creek Enterprises, which has requested a $4,310,000 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: Industry averages Debt ratio Times interest earned ratio Fixed-payment coverage ratio 0.46 7.41 1.99 Creek Enterprises Balance Sheet: Creek Enterprises's debt ratio is (Round to two decimal places.) - Data table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Creek Enterprises Balance Sheet December 31, 2019 Assets Liabilities and Stockholders' ! Current assets Current liabilities Cash $1,006,000 Accounts payable Marketable securities 2,958,000 Notes payable Accounts receivable 11,962,000 Accruals Inventories 7,523,000 Total current liabilities Total current assets $23,449,000 Long-term debt (includes financial leases)** Gross fixed assets (at cost)* Stockholders' equity Land and buildings $11,045,000 Preferred stock (24,400 shares, $4.00 dividend) Machinery and equipment 20,466,000 Common stock (1.15 million Furniture and fixtures 8,043,000 shares at $4.50 par) Gross fixed assets $39,554,000 Paid-in capital in excess of par value Less: Accumulated depreciation 13,048,000 Retained earnings Net fixed assets $26,506,000 Total stockholders' equity Total liabilities and Total assets $49,955,000 stockholders' equity *The firm has a 4-year financial lease requiring annual beginning-of-year payments of $164,0 years of the lease have yet to run. **Required annual principal payments are $849,000. Print Done Data table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Creek Enterprises Income Statement for the Year Ended December 31, 2019 Sales revenue $30,030,000 Less: Cost of goods sold 20,963,000 Gross profits $9,067,000 Less: Operating expenses Selling expense $3,033,000 General and administrative expenses 1,792,000 Lease expense 164,000 Depreciation expense 967,000 Total operating expense 5,956,000 Operating profits $3,111,000 Less: Interest expense 1,012,000 Net profits before taxes $2,099,000 Less: Taxes (rate = 21%) 440,790 Net profits after taxes $1,658,210 Less: Preferred stock dividends 97,600 Earnings available for common stockholders $1,560,610 Print Done Debt analysis Springfield Bank is evaluating Creek Enterprises, which has requested a $4,310,000 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: Industry averages Debt ratio Times interest earned ratio Fixed-payment coverage ratio 0.46 7.41 1.99 Creek Enterprises Balance Sheet: Creek Enterprises's debt ratio is (Round to two decimal places.) - Data table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Creek Enterprises Balance Sheet December 31, 2019 Assets Liabilities and Stockholders' ! Current assets Current liabilities Cash $1,006,000 Accounts payable Marketable securities 2,958,000 Notes payable Accounts receivable 11,962,000 Accruals Inventories 7,523,000 Total current liabilities Total current assets $23,449,000 Long-term debt (includes financial leases)** Gross fixed assets (at cost)* Stockholders' equity Land and buildings $11,045,000 Preferred stock (24,400 shares, $4.00 dividend) Machinery and equipment 20,466,000 Common stock (1.15 million Furniture and fixtures 8,043,000 shares at $4.50 par) Gross fixed assets $39,554,000 Paid-in capital in excess of par value Less: Accumulated depreciation 13,048,000 Retained earnings Net fixed assets $26,506,000 Total stockholders' equity Total liabilities and Total assets $49,955,000 stockholders' equity *The firm has a 4-year financial lease requiring annual beginning-of-year payments of $164,0 years of the lease have yet to run. **Required annual principal payments are $849,000. Print Done Data table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Creek Enterprises Income Statement for the Year Ended December 31, 2019 Sales revenue $30,030,000 Less: Cost of goods sold 20,963,000 Gross profits $9,067,000 Less: Operating expenses Selling expense $3,033,000 General and administrative expenses 1,792,000 Lease expense 164,000 Depreciation expense 967,000 Total operating expense 5,956,000 Operating profits $3,111,000 Less: Interest expense 1,012,000 Net profits before taxes $2,099,000 Less: Taxes (rate = 21%) 440,790 Net profits after taxes $1,658,210 Less: Preferred stock dividends 97,600 Earnings available for common stockholders $1,560,610 Print Done