Debt analysis Springfield Bank is evaluating Creek Enterprises, which has requested a $4,430,000 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. Debt ratio Industry averages Times interest earned ratio Creek Enterprises Income Statement: 0.45 7.44 Creek Enterprises Balance Sheet: Fixed-payment coverage ratio 2.10 Data Table (Click the icon here in order to copy the contents of the data table below into a spreadsheet.) 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, 2022 Assets Current assets Cash Liabilities and Stockholders' Equity Current liabilities Creek Enterprises Income Statement for the Year Ended December 31, 2022 Sales revenue Less: Cost of goods sold $30,044,000 20,993,000 $989,000 Accounts payable $7,984,000 Gross profits $9,051,000 Marketable securities 3,002,000 Notes payable 7,958,000 Less: Operating expenses Accounts receivable 12,006,000 Accruals 535,000 Selling expense $2,964,000 Inventories 7,530,000 Total current liabilities $16,477,000 General and administrative expenses 1,795,000 Total current assets $23,527,000 Long-term debt (includes Lease expense 219,000 Gross fixed assets (at cost)* financial leases)** Stockholders' equity $19,103,500 Depreciation expense Land and buildings $11,016,000 Preferred stock (24,700 Machinery and equipment 20,458,000 Furniture and fixtures 7,996,000 Gross fixed assets $39,470,000 shares, $3.75 dividend) Common stock (1.13 million shares at $5.25 par) Paid-in capital in excess of $2,459,000 Total operating expense Operating profits Less: Interest expense Net profits before taxes 5,932,500 Less: Taxes (rate = 21%) Net profits after taxes par value 3,970,000 Less: Preferred stock dividends Less: Accumulated depreciation 13,030,000 Retained earnings 2,025,000 Earnings available for common stockholders 950,000 5,928,000 $3,123,000 977,000 $2,146,000 450,660 $1,695,340 92,625 $1,602,715 Net fixed assets $26,440,000 Total stockholders' equity $14,386,500 Total liabilities and Total assets $49,967,000 stockholders' equity $49,967,000 Print Done *The firm has a 4-year lease requiring annual beginning-of-year payments of $219,000. Three years of the lease have yet to run. **Required annual principal payments are $814,000