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When to arrange additional funds
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AFN(Additional Funds Needed)
Presented bySyed Faraz Rizvi
The Formula Method for Forecasting AFN(Additional Funds Needed)
•Forecasting is the iterative process both in way Financial Statements are generated & Financial plan is developed.
•First Construct Pro forma Income Statement & Balance Sheet.
The Formula Method for Forecasting AFN
The AFN Formula
This formula can be used to initial rough estimate of financial requirements:
The Formula Method for Forecasting AFN
The AFN Formula defined as:
The Formula Method for Forecasting AFN
The Formula Method for Forecasting AFN
Inserting values, we find additional funds needed to be $118 million
The Formula Method for Forecasting AFN
Raise the Additional Funds Needed
The Formula Method for Forecasting AFN
Relationship Between Growth & Financial Requirements:
The Formula Method for Forecasting AFN
Financial Feasibility:
Effect of dividend policy on financing needs.
Forecasting Financial Requirements When the Balance Sheet Ratios are Subject to Change
•Economies of Scale
•Lumpy Assets
•No optimal Starting point Ratios
The Formula Method for Forecasting AFN
The Formula Method for Forecasting AFN
Excess Capacity Adjustments:
The Formula Method for Forecasting AFN
The Formula Method for Forecasting AFN
The END
Thank you
AFN
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