Springfield Bank is evaluating Creek? Enterprises, which hasrequested a $ 3,750,000 ?loan, to assess the? firm's financialleverage and financial risk. On the basis of the debt ratios for?Creek, along with the industry averages and? Creek's recentfinancial? statements, evaluate and recommend appropriate action onthe loan request.

Industry Averages

Debt ratio: 0.46            

Times interest earned ratio: 7.31

Fixed-payment coverage ratio: 2.00

Creek Enterprises Income Statement for the Year EndedDecember 31, 2019         
Sales revenue       $30,005,000  
Less: Cost of goods sold      20,988,000  
Gross profits       $9,017,000  
Less: Operating expenses         
Selling expense    $2,991,000     
General and administrative expenses   1,832,000      
Lease expense    203,000     
Depreciation expense   1,004,000     
Total operating expense      6,030,000  
Operating profits       $2,987,000  
Less: Interest expense      1,003,000  
Net profits before taxes       $1,984,000  
Less: Taxes (rate=21%)      416,640  
Net profits after taxes       $1,567,360  
Less: Preferred stock dividends      107,100  
Earnings available for common stockholders       $1,460,260   

Creek Enterprises Balance Sheet December 31,2019                 
      Assets                                                  Liabilities and Stockholders' Equity     
Current assets                           Current liabilities     
Cash    $1,030,000         Accounts payable   $7,990,000  
Marketable securities    2,959,000                   Notes payable    7,972,000  
Accounts receivable    11,967,000         Accruals   458,000  
Inventories    7,528,000                                   Total current liabilities   $16,420,000  
Total current assets    $23,484,000        Long-term debt (includes financialleases)**   $19,867,500     
                                                                                        
Gross fixed assets (at cost)*              Stockholders' equity     
Land and buildings    $10,984,000                            Preferred stock (25,200 shares, $4.25 dividend)   $2,457,000
               
Machinery and equipment    20,547,000             Common stock (1.11 million shares at $4.75 par)   5,272,500   
Furniture and fixtures    8,049,000           
Gross fixed assets    $39,580,000         Paid-in capital in excess of parvalue    4,004,000  
Less: Accumulated depreciation 13,015,000        Retained earnings   2,028,000  
Net fixed assets    $26,565,000         Total stockholders' equity   $13,761,500  

Total liabilities and
Total assets    50,049,000                                  stockholders' equity   $50,049,000  

*The firm has a 4-year financial lease requiring annualbeginning-of-year payments of $203,000. Three years of the leasehave yet to run.                 
**Required annual principal payments are $799,000.             

Answer the following:

Creek? Enterprises's debt ratio is: _______ (Round to twodecimal? places.)

Creek? Enterprises's times interest earned ratio is _______?(Round to two decimal? places.)

Creek? Enterprises's fixed-payment coverage ratio is:_______?(Round to two decimal? places.)

Complete the following summary of ratios and compare Creek?Enterprises's ratios vs. the industry? average:_______??(Round totwo decimal? places.)

                                                                                      Creek               Industry

Debt ratio :           

Times interest earned ratio :

Fixed-payment coverage ratio:

Do you agree or disagree with the decision?below?

Because Creek Enterprises has a much higher degree ofindebtedness and much lower ability to service debt than theaverage firm in the? industry, the loan should be rejected.