Springfield Bank is evaluating Creek Enterprises,

3-18Springfield 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 the top of the next page) 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, 2015Sales Revenue30,000,000Less: Cost of goods sold21,000,000Gross profits9,000,000Less: Operating expensesSelling expense3,000,000General and administrative expenses1,800,000Lease expense200,000Depreciation expense1,000,000Total operating expense6,000,000Operating profits3,000,000Less: Interest expense1,000,000Net profits before taxes2,000,000Less: Taxes (rate= 40%)800,000Net profits after taxes1,200,000Less: Preferred stock dividends100,000Earnings available for common stockholders1,100,000