External funding requirements can be estimated using an equation called the EFR relationship. The simple concept behind this equation is that funds will be needed to the extent of forecasted:
A)growth in assets minus new retained earnings.
B)growth in sales minus all current liabilities minus all retained earnings.
C)assets minus current liabilities minus new retained earnings.
D)growth in assets minus growth in current liabilities minus new retained earnings.

Question

Quizplus · Accepted Answer

The EFR relationship estimates that external funding requirements will be needed to the extent of the forecasted growth in assets minus the growth in current liabilities minus new retained earnings. This equation accounts for both the increase in assets and the financing of that increase through external funding, which can come in the form of debt or equity.

External Funding Requirements Can Be Estimated Using an Equation Called