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