Springfield Bank is evaluating Creek Enterprises, which has requested a $3,830,000 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.

Industry averages
Debt ratio	0.45
Times interest earned ratio	7.57
Fixed-payment coverage ratio

Creek Enterprises Income Statement for the Year Ended December 31, 2019
Sales revenue		$30,031,000
Less: Cost of goods sold		20,987,000
Gross profits		$9,044,000
Less: Operating expenses
Selling expense	$2,978,000
General and administrative expenses	1,773,000
Lease expense	199,000
Depreciation expense	974,000
Total operating expense		5,924,000
Operating profits		$3,120,000
Less: Interest expense		963,000
Net profits before taxes		$2,157,000
Less: Taxes (rate=21%)		452,970
Net profits after taxes		$1,704,030
Less: Preferred stock dividends		96,000
Earnings available for common stockholders

Creek Enterprises Balance Sheet December 31, 2019
Assets			Liabilities and Stockholders' Equity
Current assets			Current liabilities
Cash	$1,030,000		Accounts payable	$8,043,000
Marketable securities	2,958,000		Notes payable	7,991,000
Accounts receivable	11,982,000		Accruals	473,000
Inventories	7,452,000		Total current liabilities	$16,507,000
Total current assets	$23,422,000		Long-term debt (includes
			financial leases)**	$19,890,000
Gross fixed assets (at cost)*			Stockholders' equity
Land and buildings	$11,034,000		Preferred stock (24,000
			shares, $4.00 dividend)	$2,457,000
Machinery and equipment	20,484,000		Common stock (1.02 million
Furniture and fixtures	7,962,000		shares at $5.00 par)	5,100,000
Gross fixed assets	$39,480,000		Paid-in capital in excess of
			par value	3,971,000
Less: Accumulated depreciation	12,979,000		Retained earnings	1,998,000
Net fixed assets	$26,501,000		Total stockholders' equity	$13,526,000
			Total liabilities and
Total assets	$49,923,000		stockholders' equity	$49,923,000
*The firm has a 4-year financial lease requiring annual beginning-of-year payments of $199,000. Three years of the lease have yet to run.
**Required annual principal payments are $788,000.