Questions: UCA Cash Flow
Q: The company would not have to take the larger distribution and that would mean they have sufficient cash to repay the loan, isn't this correct?
A: Yes, this would be one of several options the company could pursue. If it reduced distributions by $39,458 (the cash flow deficit at Cash after Debt Repayment), it would have enjoyed sufficient operating cash flow to service its interest-bearing debt.
In addition, it could have tightened its receivables by $39,458 or tightened inventory by the same amount. Any of these three events would have reduced cash outflow sufficiently to allow the company to meet its debt service.
The interesting question is whether it would or could take any of these three steps. Its owners may have a great need for additional cash to fund their personal expenses and lifestyle, which could explain the heavy distributions. Or it may not be able to tighten receivables because of the bargaining power of its clients. Or it may have expanded inventory to take advantage of bargains and discounts that will show up in its gross margin.