In waterfall modeling, the initial calculation determines how much cash is available to distribute.

• A. Total cash available to distribute
• B. Net operating income
• C. Taxable income
• D. Debt service payment

Answer: (A)

In a cash waterfall, you start with the amount that can actually be paid out to investors—the cash left after all required uses have been covered. That starting figure is the total cash available to distribute. It represents the funds ready for allocation under the waterfall sequence, after operating costs and any required reserves and financing obligations have been addressed. Net operating income, by contrast, is the income before financing and other cash uses, so it isn’t the amount available to distribute. Taxable income is a tax metric, not a cash amount, and debt service is a cash outflow that comes after determining the distributable cash. So the initial, distributable amount is correctly captured by total cash available to distribute.