A firm's AFN must come from external sources.Typical sources include short-term bank loans, long-term bonds, preferred stock, and common stock.

Question

Quizplus · Accepted Answer

AFN stands for Additional Funds Needed and it represents the amount of funds a firm needs to raise externally in order to support its projected growth. Since the firm's internal sources may not be sufficient to cover the required investment, it has to rely on external financing, which can come in the form of short-term bank loans, long-term bonds, preferred stock, and common stock. Therefore, the statement is true.

A Firm's AFN Must Come from External Sources