Creek Enterprises Common-Size Income Statementfor the Year Ended December 31, 2015Sales revenue ($30,000,000)100%$30,000,000 Less: Cost of goods sold70$21,000,000 Gross profits30.00%$9,000,000 Less Operating expensesSelling Expenses10.00%$3,000,000 General and administrative expenses6$1,800,000 Lease expense0.67$200,000 Depreciation expense3.33$1,000,000 Total operating expense20$6,000,000 Operating profits10.00%$3,000,000 Less: Interest expense3.33$1,000,000 Net profits before taxes6.67%$2,000,000 Less: Taxes (rate = 40%)2.67$800,000 Net profit after taxes4.00%$1,200,000 Less :prefered stock dividends0.33$100,000 Earnings available for common stockholders3.67%$1,100,000 There are several issues that Creek Enterprises should investigate and analyze. First is the decline in sales revenue. Is there greater competition, are the goods outdated, is there an internal production problem, etc.? A closer look is required to look at the cost of goods sold, as they have increased from 65.9% in 2014 to 70% in 2015. The decrease of the operating expenses, though favorable in most circumstances, might be also associated with the decrease in sales. It might be advisable to analyze whether the decrease is associated with cost savings implemented or because of reduced cost is due to the decreased sales. Interest expenses in 2015 have increased to 3.33% compared to 1.5% in 2014. Most likely cause is that Creek Enterprises increased its debt level during the 2015 operating year. Creek Enterprises needs to investigate cause and reason for the increase in debt.