Ellis Corp.'s income statement for the year ended December 31, 2014, had the following condensed information:

Sales revenue....................................................................$778,000

Operating expenses (excluding depreciation)............$499,000

Depreciation expense...........................................66,000

Unrealized loss on FV-NI investments........................4,000

Loss on sale of equipment....................................14,000.........583,000

Income before income tax......................................................195,000

Income tax expense...............................................................58,000

Net income.....................................................................$137,000

There were no purchases or sales of trading (FV-NI) investments during 2014.

Ellis's statement of financial position included the following comparative data at December 31:

2014.................2013__

FV-NI investments.............................$22,000..............$26,000

Accounts receivable.............................35,000...............54,000

Accounts payable...............................44,000................31,000

Income tax payable..............................6,000..................8,500

Instructions

(a) Prepare the operating activities section of the statement of cash flows using the direct method.

(b) Assume that Ellis Corp.'s current cash debt coverage ratio in 2013 was 2. Calculate the company's current cash debt coverage ratio in 2014, and discuss the results from the perspective of a creditor.