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KASNEB CPA Intermediate study materials
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KASNEB CPA Intermediate practice questions

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Question 1Company Law

Under the Companies Act, which document is the constitution of a company that governs its internal affairs and is adopted at incorporation?

  1. The prospectus
  2. The certificate of incorporation
  3. The articles of association Correct answer.
  4. The memorandum of association

Explanation

The articles of association form the internal rulebook regulating how the company is run, including the powers of directors and the rights of members. The memorandum, by contrast, governs the company's external relations and objects.

Question 2Company Law

Which of the following is the primary consequence of incorporation under the Companies Act?

  1. The company becomes a separate legal person distinct from its members Correct answer.
  2. The shareholders become personally liable for all company debts
  3. The company must always be managed by its shareholders directly
  4. The company loses the capacity to own property in its own name

Explanation

Incorporation confers separate legal personality, so the company can own property, contract, sue and be sued in its own name. Members are generally shielded from personal liability for the company's obligations.

Question 3Company Law

A company wishes to issue shares to raise capital. Which of the following statements about share capital is correct?

  1. Called-up capital is the portion of issued capital that the company has demanded from shareholders Correct answer.
  2. Reserve capital is capital that has been fully paid by shareholders
  3. Nominal value is the market price at which shares trade on a stock exchange
  4. Issued capital is the maximum amount of capital the company is authorised to raise

Explanation

Called-up capital is the part of the issued share capital that the company has actually required shareholders to pay. Issued capital is what has been allotted, while authorised capital sets the ceiling.

Question 4Company Law

Which of the following persons is disqualified from acting as a director of a company?

  1. A person who is also a director of another company
  2. A person who is a resident of another country
  3. A person who is an undischarged bankrupt Correct answer.
  4. A person who holds shares in the company

Explanation

An undischarged bankrupt is disqualified by law from acting as a director because of the risk to creditors and the management of others' funds. Holding shares, foreign residence, and multiple directorships are not disqualifications.

Question 5Company Law

Which of the following is a fundamental duty of a company director under the Companies Act?

  1. To disclose all personal correspondence to shareholders
  2. To personally supervise every employee daily
  3. To guarantee the company's debts personally
  4. To act in the best interests of the company Correct answer.

Explanation

Directors owe fiduciary duties to the company, including acting in good faith and in the best interests of the company. They are not personal guarantors of company debts.

Question 6Company Law

What is the purpose of a company's memorandum of association?

  1. To record the minutes of general meetings
  2. To list the company's daily transactions
  3. To provide the audited financial statements
  4. To set out the company's name, objects and the liability of members Correct answer.

Explanation

The memorandum is the company's charter, stating its name, registered office, objects, and the nature of members' liability. It governs the company's external relations.

Question 7Company Law

Which of the following statements about a private company is correct?

  1. It must hold a statutory general meeting open to the public
  2. It restricts the right to transfer its shares Correct answer.
  3. It may offer its shares to the public without restriction
  4. It must have a minimum of seven members

Explanation

A defining feature of a private company is that it restricts the transfer of its shares and does not invite the public to subscribe for its securities. Public companies, not private ones, may offer shares to the public.

Question 8Company Law

A company's articles provide that any dispute between members shall be referred to arbitration. Which principle determines whether such a provision binds the members?

  1. Only the memorandum is enforceable between members
  2. The articles constitute a contract between the company and its members and among the members themselves Correct answer.
  3. The articles bind only the directors and not the members
  4. The articles are merely administrative guidelines with no binding force

Explanation

The articles of association operate as a statutory contract binding the company and its members in their capacity as members. Provisions regulating members' rights are therefore enforceable.

Question 9Company Law

A company wishes to alter its articles of association. Which of the following statements best describes the legal position?

  1. The articles may be altered by the board of directors acting alone
  2. The articles may be altered only with the unanimous consent of all creditors
  3. The articles may be altered by special resolution of the members, subject to the Companies Act Correct answer.
  4. The articles can never be altered after incorporation

Explanation

A company may alter its articles by special resolution, provided the alteration is lawful and does not conflict with the memorandum or the Companies Act. Directors cannot alter the articles alone.

Question 10Company Law

A director uses confidential company information to buy shares in another company that his company is about to acquire. Which duty has he most likely breached?

  1. The duty to exercise independent judgment
  2. The duty to promote the success of the company
  3. The duty to act within the powers conferred by the constitution
  4. The duty to avoid conflicts of interest and not to exploit corporate opportunities Correct answer.

Explanation

Exploiting confidential information for personal gain is a breach of the duty to avoid conflicts of interest and not to misuse corporate opportunities or information. The director has placed personal interest above the company's.

Question 11Company Law

A company has issued 1,000,000 shares of nominal value KSh 1 each, of which KSh 0.60 per share has been called up and paid. What is the amount of unpaid (uncalled) capital?

  1. KSh 1,000,000
  2. KSh 600,000
  3. KSh 1,600,000
  4. KSh 400,000 Correct answer.

Explanation

Uncalled capital is the difference between nominal value and called-up capital: (1.00 − 0.60) × 1,000,000 = KSh 400,000. Called-up capital is KSh 600,000.

Question 12Company Law

A director of a company is also the sole owner of a supplier business that sells goods to the company at above-market prices. What is the director's primary obligation?

  1. To keep the interest confidential to avoid disruption
  2. To transfer the supplier business to the company free of charge
  3. To resign from the supplier business immediately
  4. To disclose the interest in the transaction to the board and avoid voting on it Correct answer.

Explanation

A director with a conflict of interest must disclose it to the board and generally abstain from voting on the matter. This enables the company to assess the transaction fairly.

Question 13Company Law

Which of the following best describes the role of the company secretary?

  1. To ensure compliance with statutory filing and record-keeping obligations Correct answer.
  2. To set the remuneration of the board of directors
  3. To manage the company's investments and trading decisions
  4. To audit the company's financial statements

Explanation

The company secretary is responsible for statutory compliance, including maintaining registers, filing returns, and recording minutes. The role supports good corporate governance but is distinct from auditing or investment management.

Question 14Company Law

A company holds a general meeting at which members vote on an ordinary resolution. Which majority is required for an ordinary resolution to pass?

  1. Unanimous consent of all members
  2. A two-thirds majority of the board of directors
  3. A three-quarters majority of members voting
  4. A simple majority of members voting in person or by proxy Correct answer.

Explanation

An ordinary resolution requires a simple majority of votes cast by members entitled to vote and voting in person or by proxy. Special resolutions, by contrast, require a three-quarters majority.

Question 15Company Law

A shareholder who cannot attend a general meeting wishes to vote. Which mechanism allows this?

  1. Transferring his shares to the company secretary
  2. Appointing a proxy to vote on his behalf Correct answer.
  3. Sending a written complaint to the auditor
  4. Requesting the board to vote for him

Explanation

Members may appoint a proxy to attend and vote at meetings on their behalf, as provided by the Companies Act and the articles. This preserves the member's voting rights without personal attendance.

Question 16Company Law

Which of the following is a ground on which a court may order the winding up of a company?

  1. The company is unable to pay its debts Correct answer.
  2. The company has failed to declare a dividend for two years
  3. The company has changed its registered office
  4. The company has appointed a new auditor

Explanation

Inability to pay debts is a statutory ground for compulsory winding up. Other grounds include passing a special resolution to wind up or the court finding it just and equitable.

Question 17Company Law

A company's articles grant the directors power to refuse to register any transfer of shares. A member challenges this. What is the general legal position?

  1. The directors' power is automatically void because transfers are a shareholder right
  2. The directors must register all transfers without exception
  3. The power is valid only if approved by the auditor
  4. The directors' power is valid if exercised in good faith and in the company's interests Correct answer.

Explanation

Where the articles confer a discretion to refuse registration, directors must exercise it bona fide and in the interests of the company. Courts will not interfere with a proper exercise of the power.

Question 18Company Law

Which of the following statements about the doctrine of ultra vires in company law is correct?

  1. Acts beyond the company's stated objects are void and cannot bind the company Correct answer.
  2. The doctrine applies only to private companies
  3. The doctrine allows directors to act beyond the memorandum freely
  4. Acts beyond the objects are valid if approved by the auditor

Explanation

Under the ultra vires doctrine, acts outside the company's stated objects are beyond its legal capacity and are void. This protects members and creditors by confining the company to its authorised purposes.

Question 19Company Law

A company wishes to reduce its share capital. Which procedure is generally required under the Companies Act?

  1. A special resolution of members supported by the prescribed solvency or court procedure Correct answer.
  2. A resolution of the board of directors alone
  3. An ordinary resolution of members without any further step
  4. Approval by the company's auditors only

Explanation

Reduction of share capital requires a special resolution and compliance with the statutory safeguards, typically a solvency statement or court confirmation, to protect creditors. It cannot be done by the board alone.

Question 20Company Law

A member believes the company's affairs are being conducted in a manner unfairly prejudicial to his interests. Which remedy is available?

  1. A unilateral dissolution of the company
  2. A demand that the auditor resign
  3. A petition to the court for relief on the ground of unfair prejudice Correct answer.
  4. An automatic right to purchase the company's assets

Explanation

The Companies Act allows a member to petition the court for relief where the company's affairs are conducted in a manner unfairly prejudicial to members. The court may order remedies such as a share purchase.

Question 21Company Law

A director of a company enters into a contract on behalf of the company with a third party who acts in good faith. The director had exceeded his authority under the articles. Which statement best reflects the position under the Companies Act?

  1. The contract binds the company because the board's power to bind it is presumed in favour of good-faith third parties Correct answer.
  2. The third party is personally liable for the contract
  3. The contract is void because the director exceeded his authority
  4. The contract is valid only if ratified by the auditor

Explanation

Under the indoor management rule and statutory protections, a third party dealing in good faith may assume that internal procedures have been complied with, so the company is bound. The company may pursue the director internally for exceeding authority.

Question 22Company Law

A company is being wound up and its assets are insufficient to pay all creditors. Which class of creditors is generally paid first from the available assets?

  1. Preferential creditors such as employees for accrued wages Correct answer.
  2. Shareholders holding preference shares
  3. Ordinary unsecured creditors
  4. Directors for unpaid remuneration

Explanation

In winding up, preferential debts (such as certain employee wages and statutory dues) rank ahead of ordinary unsecured creditors. Shareholders rank last as they are owners, not creditors.

Question 23Company Law

A company's memorandum contains an objects clause limited to manufacturing. The directors enter into a contract to operate a mining business. A shareholder seeks to challenge the contract. Which analysis is most accurate?

  1. The contract is enforceable against the company because the third party can rely on the company's apparent capacity
  2. The contract is valid only if the shareholder approves it retrospectively
  3. The contract binds the directors personally but not the company
  4. The contract is void because it is ultra vires the company's objects Correct answer.

Explanation

Where the objects clause genuinely limits the company's capacity, an act outside those objects is ultra vires and void, even against a third party. The shareholder can challenge the transaction as beyond the company's legal capacity.

Question 24Company Law

A director resigns but continues to participate in board decisions and receives director's fees. A creditor later discovers this. Which principle is most relevant to determining the director's liability?

  1. The principle of unanimous shareholder consent
  2. The principle of de facto directorship and holding out Correct answer.
  3. The principle of corporate separate personality
  4. The principle of limited liability of shareholders

Explanation

A person who acts as a director without valid appointment may be treated as a de facto director and held to the same duties and liabilities. Receiving fees and participating in decisions supports that conclusion.

Question 25Company Law

A company proposes to pay a dividend out of capital rather than distributable profits. Which statement best describes the legal position?

  1. The payment is lawful if the directors believe the company is solvent
  2. The payment is lawful if the auditor certifies it
  3. The payment is lawful if approved by an ordinary resolution
  4. The payment is unlawful because dividends may only be paid out of distributable profits Correct answer.

Explanation

Dividends may only be distributed from distributable profits; paying out of capital is unlawful and may render directors liable to repay. Solvency alone does not permit a distribution from capital.

Question 26Company Law

Which of the following best describes the legal nature of a company as a separate legal person?

  1. A company is a trust in which directors hold assets for the benefit of creditors.
  2. A company is a partnership in which members are jointly liable for its debts.
  3. A company has a legal personality distinct from its members and can own property, sue and be sued in its own name. Correct answer.
  4. A company is an agent of its shareholders and acts only on their instructions.

Explanation

The doctrine of separate legal personality, established in Salomon v Salomon, means a company is a distinct legal entity from its members. It can own property, enter contracts, and sue or be sued in its own name. Members are not liable for the company's debts beyond any amount unpaid on their shares.

Question 27Company Law

Which of the following statements about the liability of members of a company limited by shares is correct?

  1. Members are liable only if they are also directors of the company.
  2. Members are personally liable for all the company's debts without limit.
  3. Members are liable for the company's debts to the extent of any amount unpaid on their shares. Correct answer.
  4. Members have no liability whatsoever in any circumstances.

Explanation

In a company limited by shares, a member's liability is limited to the amount, if any, unpaid on the shares held. Once shares are fully paid, the member has no further liability for the company's debts. This is a fundamental feature of limited liability.

Question 28Company Law

A company wishes to issue new shares to raise capital. Which of the following statements best describes the pre-emption rights of existing shareholders?

  1. Existing shareholders have a right of first refusal to subscribe for new shares in proportion to their existing holdings, unless the articles or a special resolution provide otherwise. Correct answer.
  2. Existing shareholders are entitled to receive the new shares free of charge.
  3. Existing shareholders have an absolute right to veto any new issue of shares.
  4. Existing shareholders have no rights in relation to new share issues; the directors have complete discretion.

Explanation

Pre-emption rights give existing shareholders the right to be offered new shares before they are offered to outsiders, in proportion to their existing shareholdings. These rights can be excluded or modified by the articles or by a special resolution of the members. They protect shareholders from dilution of their voting power and economic interest.

Question 29Company Law

A director of a company fails to declare a personal interest in a proposed contract with a company in which he is a shareholder. Which of the following is the most accurate statement about the consequences?

  1. The contract is valid but the director must resign from the board immediately.
  2. The contract is valid and the director has no liability because he is a shareholder of the other company.
  3. The contract is automatically void and the director commits a criminal offence in all cases.
  4. The contract may be voidable at the instance of the company, and the director may be liable to account for any profit made. Correct answer.

Explanation

Directors have a duty to disclose personal interests in transactions with the company. Breach of this duty can render the contract voidable at the company's option and may require the director to account for profits. It does not automatically make the contract void or constitute a criminal offence in all cases.

Question 30Company Law

Which of the following statements about the appointment of a company auditor is correct?

  1. The auditor is appointed by the creditors of the company.
  2. The auditor must be a director of the company.
  3. The first auditor may be appointed by the directors, and subsequent auditors are appointed by the members in general meeting. Correct answer.
  4. The auditor is always appointed by the directors and cannot be removed by the members.

Explanation

Typically, the first auditor is appointed by the directors, and subsequent auditors are appointed by the members at a general meeting. Members also have the power to remove an auditor by ordinary resolution. The auditor must be independent and cannot be a director of the company.

Question 31Company Law

A company's articles contain a provision that disputes between members shall be referred to arbitration. A member sues the company in court instead. Which principle determines whether the court will stay the proceedings?

  1. The court will never stay proceedings because company law disputes are not arbitrable.
  2. The court will stay the proceedings only if the company is insolvent.
  3. The court will stay the proceedings if the arbitration clause is valid and the dispute falls within its scope, unless there are grounds to refuse a stay. Correct answer.
  4. The court will stay the proceedings only if all members agree to arbitration.

Explanation

Arbitration clauses in articles are generally enforceable as a contract between the company and its members. A court may stay proceedings brought in breach of such a clause if the dispute is within its scope and the clause is valid. However, the court retains discretion and may refuse a stay in certain circumstances, such as where the dispute involves statutory rights that cannot be arbitrated.

Question 32Company Law

Which of the following statements about the duty of a director to act in good faith in the best interests of the company is correct?

  1. The duty is owed to the creditors at all times, whether or not the company is insolvent.
  2. The duty is owed to the company itself, and not directly to individual shareholders, creditors, or employees. Correct answer.
  3. The duty is owed primarily to the majority shareholders.
  4. The duty is owed to the employees of the company.

Explanation

Directors owe their fiduciary duties to the company as a separate legal entity. They do not owe these duties directly to shareholders, creditors, or employees, although they may have regard to their interests. When the company is insolvent or nearing insolvency, the duty may extend to creditors.

Question 33Company Law

A company proposes to enter into a transaction with one of its directors. Which of the following statements about the required disclosure under company law is correct?

  1. The director must disclose his interest only if the transaction exceeds a specified financial threshold.
  2. The director must disclose his interest only to the shareholders in general meeting.
  3. The director need not disclose his interest if the transaction is at arm's length.
  4. The director must disclose the nature and extent of his interest to the board of directors, and the disclosure must be recorded in the minutes. Correct answer.

Explanation

Directors have a statutory duty to disclose any interest in a proposed transaction to the board. The disclosure must be made at a board meeting or by written notice, and it must be recorded in the minutes. This ensures transparency and allows the board to manage conflicts of interest.

Question 34Company Law

Which of the following statements about the doctrine of piercing the corporate veil is most accurate?

  1. The courts will pierce the veil whenever a company is part of a group of companies.
  2. The courts will pierce the veil whenever a shareholder owns more than 50% of the shares.
  3. The courts may pierce the veil where the company is a mere façade or sham used to evade legal obligations, but they do so restrictively. Correct answer.
  4. The courts will pierce the veil only if the company is insolvent.

Explanation

Piercing the corporate veil is an exceptional remedy. Courts may disregard separate legal personality where the company is a façade or sham used to evade existing legal obligations or to commit fraud. It is not available merely because a company is part of a group, has a majority shareholder, or is insolvent.

Question 35Company Law

A company has annual demand of 36,000 units, ordering cost of KES 400 per order and holding cost of KES 8 per unit per year. Using the economic order quantity model, what is the EOQ?

  1. 3,000 units
  2. 1,897 units Correct answer.
  3. 2,400 units
  4. 1,500 units

Explanation

EOQ = sqrt(2DO/H) = sqrt(2 × 36,000 × 400 ÷ 8) = sqrt(3,600,000) ≈ 1,897 units. The formula balances ordering cost against holding cost at the order size where the two are equal.

Question 36Company Law

Which working capital policy is characterised by holding low levels of inventory and offering strict credit terms, thereby accepting higher stock-out risk?

  1. Aggressive policy Correct answer.
  2. Moderate policy
  3. Matching policy
  4. Conservative policy

Explanation

An aggressive working capital policy minimises investment in current assets and relies on short-term finance, trading higher risk for higher expected return. A conservative policy does the opposite by holding larger buffers.

Question 37Company Law

A firm's annual credit sales are KES 7,300,000 and its average receivables balance is KES 600,000. Using a 365-day year, what is the average collection period?

  1. 45 days
  2. 30 days Correct answer.
  3. 24 days
  4. 36 days

Explanation

Average collection period = (Receivables ÷ Credit sales) × 365 = (600,000 ÷ 7,300,000) × 365 ≈ 30 days. It measures how long, on average, customers take to settle their accounts.

Question 38Company Law

Which statement best describes the net present value decision rule for independent projects?

  1. Accept a project when its payback period is longest
  2. Accept a project when its NPV is greater than zero Correct answer.
  3. Accept a project when its IRR is below the cost of capital
  4. Accept a project when its profitability index is below one

Explanation

A positive NPV means the project's discounted cash inflows exceed its outlay, so it adds value to the firm. For independent projects, all positive-NPV projects should be accepted subject to capital availability.

Question 39Company Law

A project requires an initial outlay of KES 500,000 and generates annual cash inflows of KES 150,000 for five years. At a discount rate of 10%, the annuity factor for five years is 3.791. What is the NPV?

  1. KES 250,000
  2. KES 18,650
  3. KES 68,650 Correct answer.
  4. KES 568,650

Explanation

Present value of inflows = 150,000 × 3.791 = KES 568,650. NPV = 568,650 − 500,000 = KES 68,650, so the project is acceptable.

Question 40Company Law

What does the internal rate of return of a project represent?

  1. The time taken for undiscounted cash flows to recover the outlay
  2. The rate at which the project's cash inflows are reinvested
  3. The accounting profit divided by the initial investment
  4. The discount rate at which the project's NPV equals zero Correct answer.

Explanation

The IRR is the discount rate that equates the present value of cash inflows with the initial outlay, making NPV zero. It is compared with the cost of capital to decide acceptance.

Question 41Company Law

A company has a beta of 1.4, the risk-free rate is 5% and the expected market return is 12%. Using the CAPM, what is the required return on equity?

  1. 16.8%
  2. 14.8% Correct answer.
  3. 9.8%
  4. 12.0%

Explanation

Required return = Rf + β(Rm − Rf) = 5% + 1.4(12% − 5%) = 5% + 9.8% = 14.8%. Beta scales the market risk premium to reflect the share's systematic risk.

Question 42Company Law

Which of the following is a source of systematic risk for a listed company?

  1. A change in the central bank policy rate Correct answer.
  2. The resignation of the finance director
  3. A strike at a key supplier
  4. A product recall affecting one brand

Explanation

Systematic risk arises from economy-wide factors such as interest rates, inflation and political events that affect all firms. Firm-specific events are diversifiable and do not constitute systematic risk.

Question 43Company Law

A firm has a dividend payout ratio of 40% and a return on equity of 15%. Using the sustainable growth rate formula, what is the expected growth rate of dividends?

  1. 9.0% Correct answer.
  2. 6.0%
  3. 15.0%
  4. 4.0%

Explanation

Sustainable growth = retention ratio × ROE = (1 − 0.40) × 15% = 9%. The retention ratio is the proportion of earnings reinvested to fund growth.

Question 44Company Law

Under the dividend irrelevance theorem of Modigliani and Miller, what assumption is critical to the conclusion that dividend policy does not affect firm value?

  1. A fixed dividend payout ratio over time
  2. Investors who prefer current income to capital gains
  3. A constant return on equity
  4. Perfect capital markets with no taxes or flotation costs Correct answer.

Explanation

MM's irrelevance proposition relies on perfect capital markets, no taxes, no transaction costs and symmetric information. Under these conditions, shareholders can create home-made dividends by selling shares.

Question 45Company Law

What is the primary purpose of a rights issue?

  1. To raise new equity from existing shareholders in proportion to their holdings Correct answer.
  2. To convert debt into equity at a predetermined price
  3. To pay a special dividend to shareholders
  4. To buy back shares from the open market

Explanation

A rights issue offers existing shareholders the opportunity to buy new shares, usually at a discount, in proportion to their existing holdings. This allows the firm to raise equity while protecting shareholders from dilution.

Question 46Company Law

A firm has 4 million shares in issue trading at KES 50 each. It makes a 1-for-4 rights issue at KES 40 per share. What is the theoretical ex-rights price?

  1. KES 45.00
  2. KES 48.00 Correct answer.
  3. KES 40.00
  4. KES 47.50

Explanation

New shares = 4m ÷ 4 = 1m, raising KES 40m. Total value = (4m × 50) + 40m = KES 240m over 5m shares = KES 48.00. The TERP lies between the cum-rights price and the subscription price.

Question 47Company Law

Which of the following best describes the weighted average cost of capital?

  1. The cost of the cheapest source of finance available to the firm
  2. The interest rate on the firm's most recent debt issue
  3. The average of the costs of each source of finance weighted by their market values Correct answer.
  4. The average of the costs of each source weighted by their book values

Explanation

WACC weights each component cost by its proportion in the capital structure, ideally using market values. It represents the minimum return the firm must earn on its investments.

Question 48Company Law

A company has KES 600 million of equity with a cost of 16% and KES 400 million of debt with an after-tax cost of 6%. Ignoring other sources, what is the WACC?

  1. 10.0%
  2. 11.0%
  3. 13.6%
  4. 12.0% Correct answer.

Explanation

WACC = (600/1,000 × 16%) + (400/1,000 × 6%) = 9.6% + 2.4% = 12.0%. Weights must sum to one and each component cost is applied to its market-value proportion.

Question 49Company Law

Which of the following is a cash flow that should be included when evaluating a proposed investment project?

  1. Sunk research costs already incurred
  2. Allocated head office overhead that will not change
  3. The opportunity cost of land already owned and used for the project Correct answer.
  4. Interest payments on debt used to finance the project

Explanation

Relevant cash flows are incremental and future-oriented. Using owned land for a project forfeits its alternative use, so its opportunity cost is relevant. Financing costs are captured in the discount rate rather than in project cash flows.

Question 50Company Law

A firm's current ratio is 2.0 and its acid-test ratio is 1.2. What does the difference between the two ratios primarily indicate?

  1. The firm has excessive long-term debt
  2. A significant proportion of current assets is held as inventory Correct answer.
  3. The firm collects its receivables very slowly
  4. The firm is holding too much cash

Explanation

The acid-test ratio excludes inventory from current assets. A large gap between the current and quick ratios therefore signals a heavy reliance on inventory to meet short-term obligations.