A common-size income statement for Creek Enterprises’ 2014 operations follows. Using the firm’s 2015 income statement presented in Problem 3–18 develop the 2015 common-size income statement and compare it with the 2014 statement. Which areas require further analysis and investigation?

Data from in Problem 3–18

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 the top of  the next page) and Creek’s recent financial statements (following), evaluate and  recommend appropriate action on the loan request.

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Creek Enterprises Income Statement for the Year Ended December 31, 2015 Sales revenue $30,000,000 21,000,000 Less: Cost of goods sold Gross profits $ 9,000,000 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 $ 1,200,000 100,0000 $ 1,100,000