The term "additional funds needed (AFN)" is generally defined as follows:
A) Funds that a firm must raise externally from non-spontaneous sources, i.e., by borrowing or by selling new stock to support operations.
B) The amount of assets required per dollar of sales.
C) The amount of internally generated cash in a given year minus the amount of cash needed to acquire the new assets needed to support growth.
D) A forecasting approach in which the forecasted percentage of sales for each balance sheet account is held constant.
E) Funds that are obtained automatically from routine business transactions.

Question

Quizplus · Accepted Answer

Additional funds needed (AFN) refers to funds that a firm must raise externally from non-spontaneous sources, i.e., by borrowing or by selling new stock to support operations. Option B is referring to the asset turnover ratio, Option C is referring to free cash flow, Option D is referring to the percent of sales method, and Option E is referring to spontaneous funds.

The Term "Additional Funds Needed (AFN)" Is Generally Defined as Follows