That's how I stew just about any kind of small game. I simmer the squirrel with salt, pepper, and bay leaf, and just enough water to cover it, until it gets tender, and pulls off the bones.
Then, I cook some carrots, celery and onions, diced, in butter in a stock pot. Cook them until just soft, then add the broth from the squirrel, or rabbit, chicken, along with the meat.
Sometimes I'll add diced potatoes, like this time. If I want thicker gravy, or I'm making rice, I'll skip the Potatoes, and add flour and butter instead.
Simmer it all until the biscuits are done.