Q: Could you please revisit Poll Question 2? I originally disagreed due to needing a personal financial statement to support the liquidity. Perhaps we misunderstood the question.

A: The first step in creating a global cash flow is to assume that a guarantor's personal cash flow surplus is always available to meet a company cash shortfall in a crisis. This is the standard practice in the industry.

The real issue here, however, is whether it is practical – in spite of industry practices – to assume that a personal cash flow surplus is always available to support company debt. As we have stressed, the far better measure is the ready cash available to a guarantor. This is the proof of the pudding – the evidence of the fate of a personal cash flow surplus. To identify ready cash, we then need information from a personal financial statement or, far better, current bank, brokerage, or financial advisor statements.

Q: How did you arrive at $270K ready cash?

A: As shown on Slide 30, one should use only highly liquid personal assets, excluding the cash accounts. Then reduce the reported value of the securities by some factor to allow for fluctuations in market value by the time the guarantor would need to access the assets.  

Note, too, in this instance that Schumacher must repay the margin account from the cash received via liquidation of personal assets that were supported by the margin account.