S-Corp pass thru books/taxes

the tax laws do not require that profits be distributed to the shareholders ever.  state laws would say any distributions are at the discretion of the board of directors (in the case of an S-Corp probably the same as the shareholders) and to make distributions there has to be cash or property available. so how is it that there is more income than money available? one way this could happen is to make capital expenditures that can not be immediately expensed. another way is to use the accrual method of accounting so income from sales is recognized before the cash is received. inventories not treated as an immediate expense can also cause cash flow issues if they're paid for before the items are sold.  for a better explanation of your particular situation see a tax pro who can see the books and reporting and thus explain the reason and possibly offer a solution. 

In addition to @Mike9241 explanation, most pass-through entities (S corporation, partnership), distribute sufficient $$ to cover the tax for their shareholder's / partner's.

Usually the entity determines a reasonable tax rate based on both federal and state tax; ie: 35% federal, 5% state for a total distribution of 40% (example only as this will vary by entity).

Using a simple example, if the S corporation has a bottom line profit of $75,000, each shareholder will be allocated $25,000 in taxable income.  Using a 40% tax rate, the S corporation would then distribute $10,000 to each shareholder to cover their tax liability.