PLEASE NOTE: There is a typo in your book regarding the Times-Interest-Earned Ratio. The correct formula is EBIT/Interest Expense. Complete a debt analysis for this company. * Calculate AND interpret the debt ratio, the times-interest-earned ratio, the fixed-payment coverage ratio * Make a credit decision. Based on the loan request and on your analysis, would you approve or deny the loan request? As always, show ALL of your work. P3-18 Debt analysis Springfield Bank is evaluating Creek Enterprises, which has requested a $4,000,000 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 (see top of page 103) and Creek's recent financial statements (following), evaluate and recommend appropriate action on the loan request. Creek Enterprises Income Statement for the Year Ended December 31, 2012 $30,000,000 21,000,000 $ 9,000,000 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Selling expense General and administrative expenses Lease expense Depreciation expense Total operating expense Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate = 40%) Net profits after taxes Less: Preferred stock dividends Earnings available for common stockholders $ 3,000,000 1,800,000 200,000 1,000,000 $ 6,000,000 $ 3,000,000 1,000,000 $ 2,000,000 800,000 $ 1,200,000 100,000 $ 1,100,000