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In: Finance

As part of financial planning for an organization, being able to determine the amount of Additional...

As part of financial planning for an organization, being able to determine the amount of Additional Funds Needed (AFN) by an organization to achieve its growth goals is an important part of this financial forecasting. Please explain what we mean by AFN, the sources of funds, and how an organization goes about determining its AFN.

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Expert Solution

Additional funds needed is one of the important element for financial planning because it is reflecting the proactiveness of Organisation in order to achieve its growth goals and achieve financial forecasting for its need of funds.

Additional funds needed is always reflecting that additional funds will be needed by the company in order to grow and generate high rate of return in order to maximize the overall value of the company and help the shareholders of the company in order to generate a high rate of return.

it is often believed that those companies who are proactively able to judge their needs of financing and proactively incorporate adequate financing in the overall futuristic projects will be having a Core competitiveness and competitive advantage against its competitors because it could be proactively employing its capital into such investment opportunities which will be helpful in generation of a high rate of return.

Additional funds needed=[projected increase in assets-spontaneous increase in liabilities-increase in retained earnings]

These additional funds are proactively managed by highly efficient companies and they are trying to employ these funds in best investment opportunities which are possible for the management in order to create a high rate of return for its shareholders.


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