## 35 Short Term Debt

So once we have corrected the mistake that we made in the previous video wherein we copied everything in the short term debt but in fact we should have copied it to the cash and cash equivalents. We get the following. Is something that I will remove. Now we get the balance check and we see that the balance is off beat by twenty nine seventy nine for each and every year. If you look at the short term debt it is exactly the same value. So we know instantly that debt is something that needs to be done over here to make this balance to zero. Let us go back to the shot to the schedule for short short term debt. So once we did the show schedule for the short term debt we know the end of be debt short term debt that we have taken from the balance sheet already the beginning of beta is the same as the end of it for the last year and whether we are paying that or whether we are issuing any more debt is something that needs to be seen the end of the debt is nothing but the sum of some of the two numbers. So how do we know whether we are taking cash or paying cash. So let us look at this at this point of time now. So let us look at what is. So what is the initial cash that we have in 2016. It’s the same as the cash balance sheet of 2015 which is nothing but 9 9 5 7 this is the cash that we have in 2016 start to become year end with 8 9 9 5 7 0 0 0 more this to and always whenever a company has a cash that the company will use not to then bad cash to pay down debt. It needs to have a certain kind of rule that it will not be it will not keep a cash balance of less than that much amount. Usually companies have a minimum cash requirement of five thousand. It is hardcoded what you can do is that you can go to the annual report and you can see that the cash. What is the cash that the company had in the last few years. And then when you look at the cash that the company had in the last few years you can see that what is the minimum amount of cash balance that the company had in the last 10 years. And you can use that number to find that what are the million cash required. 9 9 5 7 it had in cash 5000 it requires just for maintaining its operation. So what is the actual number that it had nothing but this plus. This leaves the cash that is not it hat in hand plus it has generated certain cash due to the operating activity which we have generated over a year to the total cash that it has in hand is nothing but the sum of these two the become come company has thirteen thousand five hundred and seventeen worth of debt next hand. So this is enough to pay down the debt but is just two thousand nine hundred seventy nine. So let all you will have to use the formula to find out whether the company is going to pay down the debt or not. The formula says that if the cash that I have in hand is less than zero and if I do not have cash at all that I would need to borrow money. How much would I need to borrow the one that I am less if I am nine nine thousand short I need to borrow nine thousand to come to your cash balance and then I need to borrow this much and subtract with this a negative number. And then I have to borrow this much to get to a minimum cash requirement. So if I had around nine total minus nine thousand over a year I would need nine thousand. OK if I look at it the formula basis this negative sign should not be coming. So minus 9 to the minus side out on that will be minus 14 told them will be there my cash requirement. However if I have positive cash balance then I would pay down my debt if my debt is less than the cash that I have that then I will pay down the entire debt of the cash that I have is left and the debt that I would use my cash whatever I have to pay down the debt which I can pay and the remaining I would go in the next few years. That is why we am using the minimum functionally a minimum will take the minimum of the debt or the cash whatever I have in this case it’s I have thirteen thousand five hundred seventeen dollars in hand and our debt is two thousand nine hundred seven point seventy nine so I will pay the entire debt load this controller as well as this would be done let’s control. So now you know that the debt is going to be zero for the next period and then I am just going to come here and the balance sheet to the balance sheet and I am going to copy this CDO from the schedule that I have just recently built up and copy this for the next length as well. But still if you see it is still showing us to total 979. That is because although we have taken care of that in the debt schedule and in the balance sheet we have not taken care of debt in the cash flow statement. So over a year I have to select the changes in cash flow which is this and then move forward. So now if you go and check the balance sheet it should balance and if it’s not balancing that means that we have made a silly mistake. But it is balancing so that means we have completed the financial model. We are done with creating the financial model. However there are a few little things that remain remaining that needs to be taken care of. So let us look at that. So the interest rate of short term debt is something that you can assume to be same as the one on the long term debt which is close to two point four percent and interest expense will with an interest rate in total the document that you have indicated zero so there won’t be an interest expense. Just walk with it forward and you have this as well. So we are done with everything now. Just three more disclosure. But now we are done with everything we have the balance sheet. We have the income statement and we have the cash flow statement as well. There are a little of just a few things remaining regarding the cash flow statement that and you have to calculate the cash flow interest income and the shares outstanding. And then we’ll put it on with the analysis that is a large part of our financial model. So having understood that it’s now time for us to understand the cash flow schedules and the shares outstanding as well.