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

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