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# How to calculate working capital from balance sheet

Businesses keep accounting records and aggregate their financial data on financial reports. To find the information you need to calculate working capital, you'll need the company's balance sheet. Current assets and liabilities are both common balance sheet entries, so you shouldn't need to do any other calculating or assuming Working capital, like cash flow, is something that is constantly changing. Due of this, to calculate your business's current amount of working capital, you'll need to review your balance sheet.In this blog post, we'll explain how to correctly do this so that you can take charge of your business finances Here are the steps you should follow to calculate working capital: 1. Calculate current assets. The first section that you will complete on the balance sheet calculates your company's total assets. A company's assets simply refer to its total capital. Anything of value that the company has, from cash to investments, makes up the total assets A company's balance sheet provides the information necessary to calculate capital employed. Key metrics to review from a company's balance sheet when performing a capital-employed analysis are.

### How to Calculate Working Capital - The Balanc

If the price per unit of the product is \$1000 and the cost per unit in inventory Inventory Inventory is a current asset account found on the balance sheet, consisting of all raw materials, work-in-progress, and finished goods that a is \$600, then the company's working capital will increase by \$400 for every unit sold, because either cash or. How to Calculate Working Capital . Working capital is calculated by using the current ratio, which is current assets divided by current liabilities. A ratio above 1 means current assets exceed.

Step 3: Subtract. Now that you have values for your current assets and current liabilities, plug them into the following formula: (Current Assets) - (Current Liabilities) = (Working Capital) E.G. \$75,000 - \$42,000 = \$33,000. The resulting amount is your working capital. In the provided example, the business has \$33,000 of working capital Working Capital Assumptions STEP 19. Working Capital Assumptions. Operating Income Depreciation of Existing Fixed Assets. Our next step is to forecast working capital on the balance sheet. Working capital is typically forecast using historical working capital items as percentages of sales or COGS, as applicable The wrong way to do this is to calculate the working capital in year one from the balance sheet, then calculate the working capital in year two from the balance sheet and then subtract to get the change. Change in working capital is a cash flow item that reflects the actual cash used to operate the business

Calculate Changes in Net Working Capital using the formula below - It appears as a current asset in the corporate balance sheet. read more. But sales may have a declining effect. Inventory planning also impacts the change in working capital. An increase in inventory increases the usage of cash Setting up a Net Working Capital Schedule. Below are the steps an analyst would take to forecast NWC using a schedule in Excel. Step 1. At the very top of the working capital schedule, reference sales and cost of goods sold from the income statement Income Statement The Income Statement is one of a company's core financial statements that shows their profit and loss over a period of time Below is a balance sheet used to calculate working capital. Total current in the balance sheet is Sh. 3,800,000 and the total current liabilities is Sh. 80,000. Therefore, the working capital is Sh. 3,720,000 Paid-in capital formula. It's pretty easy to calculate the paid-in capital from a company's balance sheet. The formula is: Stockholders' equity-retained earnings + treasury stock = Paid-in capital.

### Calculate Working Capital Through a Balance Sheet Fora

1. Working capital presentation on the cash flow statement. The balance sheet organizes assets and liabilities in order of liquidity (i.e. current vs long term), making it very easy to identify and calculate working capital (current assets less current liabilities)
2. In This Video We Are Going To Understand The Balance Sheet Concept Of Working Capital.We Will Also Learn To Calculate Gross Working Capital As Well As Ne..
3. us total liabilities equals equity applies, in that equity is capital. However, there is also risk-based capital, which generally includes equity capital.
4. e the current assets and liabilities of the company, which you can usually find on the balance sheet. These assets include foreign direct investments, securities like stocks and bonds, and gold and foreign exchange reserves. Subtract the current liability total from the current asset.
5. Working capital—also known as net working capital—is a measurement of a business's short-term financial health. Simply put, it indicates your liquidity or ability to pay your bills. You can find it by taking your current assets and subtracting your current liabilities, both of which can be found on your balance sheet
6. How to Calculate Working Capital from the Balance Sheet. Working Capital is calculated by taking Current Assets and subtracting Current Liabilities. These metrics are typically found at the top of the consolidated balance sheet
7. e the current assets and liabilities of the company, which you can usually find on the balance sheet. Subtract the current liability total from the current asset total to get the working capital

Change in working capital= change in current assets - change in current liabilities. Change in current assets can be generated by subtracting last period CA from current year CA, same is for CL Answer to: Using the following accounts and balances taken from a year-end balance sheet, compute working capital and the current ratio. Accounts.. Net working capital is the difference between a business's current assets and its current liabilities. Net working capital is calculated using line items from a business's balance sheet. Generally, the larger your net working capital balance is, the more likely it is that your company can cover its current obligations

### Capital on a Balance Sheet: What It Is and How To Calculate I

1. e its effect on the company's cash flow. An increase in net working capital reduces a company's cash flow because the cash cannot be used for other purposes while it is tied up in working.
2. How to calculate a working capital turnover ratio. Before you can calculate your working capital turnover ratio, you need to figure out your working capital, if you don't know it already. To do so, take your current assets and subtract your total current liabilities. Both of these figures should be reported on your balance sheet
3. Net Working Capital = Current Assets − Current Liabilities = \$49,433M − \$43,625M = \$5,808 million. Net Operating Working Capital = Operating Current Assets − Operating Current Liabilities = \$30,678M − \$34,444M = -\$3,766 million. Low working capital and low net operating working capital together with unfavorable current ratio, quick ratio, days sales in receivable and days sales in.
4. The asset is equal to the sum to all assets, i.e., cash, accounts receivable Accounts Receivable Accounts receivables refer to the amount due on the customers for the credit sales of the products or services made by the company to them. It appears as a current asset in the corporate balance sheet. read more, prepaid expense, and inventory, i.e., \$305,483 for the year 2018
5. Net working capital is a good gauge of a company's short-term ability to cover obligations. It's typically a simple calculation derived from a company's balance sheet wherein current liabilities are deducted from current assets. The change in net working capital from one period to the next is also typically used in the calculation of.
6. How to calculate working capital ratio from balance sheet Return on Investment (ROI) is the amount of profit you receive with respect to your invested capital. For example, a ROI of 10 percent means that for every dollar invested, you gained 10 cents

The balance sheet lists assets by category in order of liquidity, starting with cash and cash equivalents. It also lists liabilities by category, with current liabilities first followed by long-term liabilities. How to Calculate Working Capital. Working capital is calculated as current assets minus current liabilities, as detailed on the. How do you calculate working capital? Working capital is the simplest of all the balance sheet formulas to calculate. Here is the formula you will need: Current assets - Current liabilities = Working capital. For instance, say business has \$500,000 in cash on hand. It also has \$250,000 unpaid and owed to the business in the form of accounts. Example of Working capital Formula. The Balance Sheet of Tata Steel is presented as follows: Current Liabilities (INR in Cr.) Current Assets (INR in Cr.) Short-term provisions. The Working Capital of Tata steel at that point in time would be. Working Capital = INR (34643.91 - 25607.34) Working Capital = INR 9036.57

### Calculate Capital Employed from a Company Balance Shee

1. how to calculate working capital on the balance sheet working capital is more reliable than almost any other financial ratio or balance sheet calculation because it tells you what would remain if a pany took all its short term resources and used them to pay off all its short term liabilities what is working capital definition of working capital working capital is the amount of a pany s current.
2. g you see a positive number, that means you're in a.
3. The working capital formula is the comparison of the balance sheet current portion i.e. current assets and current liabilities. In most cases, current assets include cash, account receivable, inventory, and short-term investment of the company
4. Net working capital of a company should always be positive otherwise it prompts signs of danger. The net working capital not only includes fixed assets but also involves plants and equipment owned by the organisation. Moreover, the balance sheet of a company shows what is owned or rented by the organisation

The following are the extracts from the balance sheet of a company as on 30.6.2008. Compute the additional working capital required by the company for the year ending 30.6.2009. Estimating Working Capital Requirement Method # 2. Regression Analysis Method (Average Relationship between Sales and Working Capital) Calculating the Ratios Using Amounts from the Balance Sheet. You will be using the following balance sheet to calculate the first group of financial ratios: Calculations of Working Capital, Current Ratio, and Quick Ratio Use the amounts in Example Corporation's balance sheet (above) to calculate the following financial ratios: Working capital. Net Working Capital Ratio = Current assets ÷ Current Liabilities. Here's a couple examples. A business has current assets totaling \$150,000 and current liabilities totaling \$100,000. That means their NWC ratio is 1.5. It's positive. A business has current assets totaling \$100,000 and current liabilities totaling \$135,000 ### How Do You Calculate Working Capital? - Investopedi

1. Working Capital = (Accounts receivable + Inventory + Cash) - (Accounts Payable + Short-term loans) As mentioned, at any point, the above formula may result in a positive or negative figure. If the result is positive, it means that the company's current assets exceed its current liabilities. For negative working capital, the opposite will apply
2. The projected balance sheet is submitted to the bankers for the purpose of assessing the quantum of finance based on the balance sheet. It is interesting to note at this point that a full years need for working capital of a borrower is based on audited balance sheet which is the snapshot of the business concern as on a particular day
3. How to Calculate Working Capital. The working capital formula is simple: Subtract current liabilities from current assets. Current assets are cash and assets you can convert into cash within a year (this doesn't include fixed assets, which are considered long-term assets on your balance sheet)
4. Assets and liabilities are included in the balance sheet, and you'll use the components of the balance sheet to calculate working capital. The balance sheet is generated using a formula. Understanding the balance sheet formula. A balance sheet is a financial statement that reports assets, liabilities, and equity balances as of a specific date
5. The net working capital formula is a very simple calculation which subtracts the current liabilities from the current assets, leaving you with your net working capital. The current assets and liabilities are often found on the company balance sheet, but sometimes the balance sheet doesn't separate current and non-current assets
6. Working capital must be shown on the balance sheet on the assets side. It is composed of the inventories, such as raw and operating materials, finished products and goods; from accounts receivable such as accounts receivable from deliveries and services and from liquid funds such as checks, cash in hand and credit balances with banks
7. What about working capital and stockholder's equity? Although they all have to do with the equity section of the balance sheet, working capital and shareholder's equity (also called stockholder equity, paid-in capital or owner's equity) are different from retained earnings

### How To Calculate Net Working Capital in 3 Easy Steps Behal

The asset is equal to the sum to all assets, i.e., cash, accounts receivable Accounts Receivable Accounts receivables refer to the amount due on the customers for the credit sales of the products or services made by the company to them. It appears as a current asset in the corporate balance sheet. read more, prepaid expense, and inventory, i.e., \$305,483 for the year 2018 In this example, you have \$20,000 in working capital. Keep in mind that working capital is not the same as cash flow. The current assets section of your balance sheet includes accounts receivables, which is money that others owe you. If you have \$10,000 in open invoices, while you technically have \$20,000 in working capital, \$10,000 of that isn. Change in Net Working Capital = 12,000 - 7,000. Change in Net Working Capital = 5,000. Since the change in net working capital has increased, it means that change in current assets is more than a change in current liabilities. So current assets have increased. It means that the company has spent money to purchase those assets

1. Gross Working Capital. The total current assets on a company's balance sheet that can be liquidated if necessary. 2. Net Working Capital. The difference between current assets and current liabilities. 3. Fixed Working Capital. Working capital that is associated with fixed assets (property, equipment, etc.) needed to continue business. How to calculate the working capital requirement? The working capital requirement (WCR) is calculated from the balance sheet. There are two calculation formulas, a simplified formula and a longer one. The simplest formula for calculating working capital requirements is: WCR = inventories + receivables - non-financial liabilitie On the balance sheet, assets are listed based on how quickly they can be converted into cash. So, current assets are typically listed towards the top of the balance sheet, because they're typically intended to be converted into cash in a year's time, and are then followed by noncurrent assets and fixed assets Working capital management is the process of managing short term assets such as accounts payable, accounts receivable and inventory to ensure that a business has sufficient cash flow to meet its obligations. Generally speaking, businesses that manage working capital well are more agile and better equipped to grow without financing

### LBO Model > Balance Sheet Working Capital Assumption

Plugging these values into our net working capital calculator, we get: \$750,000 + \$80,500 + \$150,000 = \$980,500 in total current assets. \$500,000 + \$100,000 + \$60,200 = \$660,200 in total current liabilities. We can now use these totals to calculate NWC: \$980,500 - \$660,200 = \$320,300. Company X has a net working capital balance of \$320,300 Financially healthy companies maintain a positive balance of working capital. Working capital is similar to the current ratio (current assets divided by current liabilities). Working capital is a dollar amount, and the current ratio is a ratio. Liquidity is the ability to generate enough current assets to pay current liabilities, and owners use. Working capital affects many aspects of your business, from paying your employees and vendors to keeping the lights on and planning for sustainable long-term growth. In short, working capital is the money available to meet your current, short-term obligations. To make sure your working capital works for you, you'll need to calculate your.

Working capital is a financial metric which represents operating liquidity available to a business, organization, or other entity, including governmental entities is calculated using working_capital = Current Assets-Current Liabilities.To calculate Working capital, you need Current Assets (CA) and Current Liabilities (CL).With our tool, you need to enter the respective value for Current Assets. As mentioned above, the net working capital ratio is a measure of a firm's liquidity or how quickly it can convert its assets to cash. In the extended example provided, you can see that if the business has fewer credit customers (accounts receivable) than anticipated, or if it has less inventory, cash, or marketable securities than expected, the net working capital ratio can fall below 1.0 ### How to Find and Calculate Changes in Working Capital for

Working Capital Ratio Formula: Figure out your current assets (i.e., what your company owns).; Figure out your current liabilities (i.e., what your company owes).; Take your total current assets and divide it by your total current liabilities.; The number you're left with is your working capital ratio.. Remember, this is the ratio of current assets found on a company's balance sheet (i.e. Calculating Invested Capital . Balance sheet and statement of cash flows: To calculate the denominator of the ROIC equation, you need access to both the firm's balance sheet and statement of cash flows. Consider debt financing: Calculate the total amount of the firm's debt. This calculation will include current liabilities plus long-term debt. There is a series of steps that must be taken to calculate working capital needs: 1. Calculate Working Capital Available in Days (WCA) Multiply the working capital amount (current assets minus current liabilities) from the most recent balance sheet by 365 days, then divide that total by the most recent annual sales revenue

### Changes in Net Working Capital Step by Step Calculatio

Using the income statement and balance sheet, you can use the following formula where PP&E refers to property, plant and equipment. Property, plant and equipment is a line item on your company's balance sheet. capital expenditures = PP&E (current period) - PP&E (prior period) + depreciation (current period Review the company's end-of-period Balance Sheet for the most recent annual report. List the amount of Current Assets and Current Liabilities for the currently reported year, and for the previous year. Use these amounts to calculate the company's (A) working capital and (B) current ratio Step 3. Add your result to cash flow from financing activities to calculate the net increase in cash for the accounting period. A negative result represents a net decrease, while a positive result represents a net increase. In the example, add -\$50,000 and -\$5,000. The result is -\$55,000

This metric is much more tied to cash flows than the net working capital calculation is because NWC includes all current assets and current liabilities. Because of this, NOWC is often used to calculate free cash flow. Let's look at an example. Example. Let's assume Bill's Machining has the following assets on its balance sheet. Cash: \$100,00 Improving DSO represents an achievable Grail for businesses. Indeed, it is the main lever to reduce the Working Capital Requirement, and therefore improve the cash flow and the investment capacity of the company. Trade receivables usually represent in average about 30% of total balance sheet of companies The final calculation Tom will need to make before calculating his business CCC is the days payable outstanding, or DPO. The DPO is used to calculate the number of days it takes for a business to pay vendors and suppliers. To calculate DPO, Tom will need to first find his average accounts payable balance for the year

How to calculate working capital using balance sheet The greater your small-business profit, the greater are the assets that show up on the balance sheet at the end of the day. However, the relationship between earnings, or profit, and balance sheet assets isn't entirely straightforward A balance sheet tells you what the company owns, how much the company owes and who owns the company. It consists of assets, liabilities and stockholders' equity. Working capital is the amount of.

### Net Working Capital - Guide, Examples, and Impact on Cash Flo

• Net Working Capital (NWC) is the difference between a company's current assets and current liabilities on its balance sheet. It is a measure of a company's liquidity and its ability to meet short-term obligations, as well as fund operations of the business
• Know you working capital, in this period of declining prices you must be in the practice of preparing an accurate balance sheet and accrual income statement. You need to have the knowledge that you can take action and price grain if you see opportunities to sell
• On the balance sheet long term debt is \$2,304, Equity is 3,456 and total assets is \$5,760 To understand and calculate WACC (Weighted Average Cost of Capital), analysts will need to dig into equity, preference shares, bank loans and bonds The WACC formula used by the calculator in the Excel template is: WACC = (E/V x Re) + ((D/V x Rd) x (1 - T.
• Net Working Capital: Balance Sheet Formula. It is not difficult to find out the amount of net capital from the compiled balance sheet - only two lines of balance are involved in the calculations: Line 1200 - the total amount of the 2nd section, often equal to the cost of equity, Line 1500 - the result of the 5th section Short-term.
• Working Capital in the Financial Projections Template. The financial projections template uses these calculations based on revenue, cost of sales and days to work out the accounts receivable, inventory, and accounts payable shown in the balance sheet, this in turn leads to the change in working capital shown in the cash flow statement of the.
• us current liabilities) to fund its ongoing operations. In the context of M&A, buyers will view sufficient NWC, essentially, the same as other assets purchased in the deal. if a buyer deter

### How to Calculate Working Capital

fulbrook capital management, how to calculate working capital on the balance sheet, leadership rockefeller capital management, working capital report 2018 19 navigating uncertainty pwc, working capital management project report working capital, growthworks home, capital management associates inc to Working capital represents the difference between a company's current assets and current liabilities. The challenge is to determine the right category based on the large number of assets and liabilities on the company's balance sheet and outline the company's overall health in meeting its short-term commitments. Working Capital Component

You could calculate working capital from the balance sheet even if you didn't have a cash flow statement. Purpose of Cash Flow From Operations (CFO) The cash flow from operations is detailed first in the cash flow statement and tells you how much cash flow has been generated by the core operations of the business, as opposed to secondary. Formula. The working capital ratio is calculated by dividing current assets by current liabilities. Both of these current accounts are stated separately from their respective long-term accounts on the balance sheet. This presentation gives investors and creditors more information to analyze about the company. Current assets and liabilities are.

### How to Calculate a Paid-In-Capital Balance-Sheet Formula

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• Net Working Capital Formula: How To Calculate Nwc Formula. For example, interest on short-term and long-term loans taken to finance such current assets. Your business must have an adequate amount of working capital to survive and perform its day-to-day operations. Calculate the debt ratio and the debt/equity as of the most recent balance sheet.
• A broad ratio to show the level of liabilities on the balance sheet compared to the assets. Price to Working Capital = Price / Working Capital per Share. where, Working Capital = Current Assets - Current Liabilities. Working capital is the absolute lifeblood of a company. Most fast growing and successful businesses die due to a lack of.
• In other words, a firm's management must ensure proper working capital management to achieve the perfect balance. Gross Working Capital Example. Take a look at the excerpt of a Balance Sheet to gain a better understanding of the placement and treatment of the components of gross working capital
• The balance sheet for the company at the beginning of 2009 is shown in the middle column. Using the figures from the balance sheet at Dec 31, 2008, total capital is \$330,067,000,000 (long-term debt) + \$104,665,000,000 (total shareholder equity) = \$434,732,000,000
• It shows how long cash is tied up in the companies working capital. Ending balance sheet amounts are commonly the basis for forecasting forward and are used in the formulas shown above. Some analysts (typically credit analysts) use an average balance figure for the period instead. However, the ending balance is preferred for forecasting
• Answer to: Using the following accounts and balances taken from a year-end balance sheet, calculate working capital: Accounts payable \$100,000.. How is working capital used in calculating a purchase price? There are several ways to use working capital as a factor in calculating a purchase price. Below are a couple of examples. Minimum working capital requirement - the seller agrees to deliver a minimum amount of adjusted working capital on the balance sheet at closing. If the. Balance sheet with financial ratios. Calculate financial ratios with this Excel balance sheet template. When you enter your asset and liabilities, this balance sheet template will automatically calculate current ratio, quick ratio, cash ratio, working capital, debt-to-equity ratio, and debt ratio Working capital Formula Working capital of a business represents its liquidity status, i.e., its ability to meet short-term operational liabilities through assets convertible to cash. A business has adequate working capital when its current assets exceed the value of current liabilities by a healthy margin ### Working Capital Example, Formula & Definition - Wall

• For any year, then, we add and subtract the following to calculate a company's net working capital: Required cash. We usually assume that a company needs to have some cash on hand to run its business. We can estimate that sum as a fixed amount of cash, or an amount as a percentage of sales. Thus, we add required cash to calculate working capital
• How to Calculate Working Capital. The excess of current assets over current liabilities is known as a company's working capital, it is calculated as follows: WC = Current Assets - Current Liabilities. Examples of current assets - Debtors, Cash, Bank, Inventory, Prepaid Expenses, etc. Examples of current liabilities - Creditors.
• Working capital is one of the easiest business-related figures to calculate. All that you need to do is subtract your company's current liabilities from its current assets. You can find your liabilities and assets listed on your balance sheet. Liabilities are short-term debts that you need to pay off within the next twelve months, such as.
• Answer to: How do you calculate the working Capital ratio if net sales information is not available in the balance sheet? By signing up, you'll get..

Simply, your new working capital needs equals the change in Accounts Receivable plus Inventory minus Accounts Payable. For our example, if you project to grow your sales from \$500,000 to \$700,000, you will need additional working capital of \$21,496 For these reasons, it is important that net working capital results are compared with past figures for the company. To view the balance sheet analysis for Sunny Sunglasses Shop, click balance sheet analysis. Back from Working Capital to the Financial Ratios and Financial Statement Analysis Main Page. Back to the Accounting Terms Main Pag Calculate working capital. This calculation is just basic subtraction. Subtract the current liability total from the current asset total. For example, imagine a company had current assets of \$50,000 and current liabilities of \$24,000 What is working capital? Working capital is the money you need to support short-term operations. It is this focus on the short term that distinguishes working capital from longer-term investments in fixed assets or R&D.. Working capital is the difference between current assets and current liabilities. Current again refers to the fact that these items fluctuate in the short term, increasing.  ### Working Capital - Balance Sheet Concept - YouTub

• Remember, negative working capital is a sign of danger and indicates that the company is moving towards the red hence beware. Types of Working Capital. According to the balance sheet, working capital can be classified into. 1) Net Working Capital. Net Working Capital is a comprehensive study of the financial condition of a business entity. It.
• Working Capital Working capital is the cash tied up in the day-to-day activities of a business. More technically, the term working capital is often used as a generally accepted collective term for short-term balance sheet items, which comprise current assets and current liabilities.. The main current assets on a balance sheet are cash, accounts receivable, inventory and other current assets
• Understanding how to calculate working capital will help you keep abreast of your financial situation and take steps to address potential cash shortfalls. Gather your financial records, such as your balance sheet, general ledger, cash flow statement and accounts receivables and payables reports
• Working Capital is an essential metric in financial analysis, as it shows creditors and potential investors if the company can pay its short-term payables within one year. The challenge we face is in correctly classifying the assets and liabilities on the balance sheet as current and non-current
• While its balance sheet for 2005 is shown here Calculate Ideko's working capital requirements through 2010 below. (Round to the nearest S 000) Working Capital (3 000) 2005 Assets Accounts Receivable Raw Materials Finished Goods Minimum Cash Balance Total Current Assets Liabilities Wages Payable Other Accounts Payable Total Current Liabilities.
• i. Maximum Permissible Bank Finance (MPBF): Under MPBF approach, the banks will fix the working capital finance limits of a firm at either 75 per cent of the company's current assets or the difference between 75% of current assets and non-bank current liabilities

### How to calculate total capital from a balance sheet - Quor

• The Balance Sheet and Credit Risk Analysis. Calculate working capital, current ratio, and the debt ratio for the current year and the past year (show your calculations). Indicate whether the ratios are improving or deteriorating. If you find a relevant benchmark (industry average or rule-of-thumb), comment on your company's performance.
• How do we calculate working capital?, Working capital is calculated by taking current assets and deducting current liabilities. For instance, if a company has current assets of \$100,000 and current liabilities of \$80,000, then their working capital would be \$20,000. Common examples of current assets include cash, accounts receivable, and inventory
• Calculate liquidity measures The following amounts were reported on the December 31, 2016, balance sheet: Required: a. Calculate working capital at December 31, 2016. b. Calculate the current ratio at December 31, 2016. c. Calculate the acid-test ratio at December 31, 2016
• Net working capital (NWC) of a company is calculated by taking out current liabilities from current assets. Therefore, the formula to calculate NWC is; NWC = current assets - current liabilities. It shows the liquidity position of a company as on the balance sheet date. It tells you whether the company can meet its short term obligations or not 