When to arrange additional funds

1. AFN
(Additional Funds Needed)
Presented by
Syed Faraz Rizvi

2. 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.

3. The Formula Method for Forecasting AFN
The AFN Formula
This formula can be used to initial rough estimate of
financial requirements:

4. The Formula Method for Forecasting AFN
The AFN Formula defined as:

5. The Formula Method for Forecasting AFN

6. The Formula Method for Forecasting AFN

7. Inserting values, we find additional funds needed to be $118 million
The Formula Method for Forecasting AFN

8. Raise the Additional Funds Needed
The Formula Method for Forecasting AFN

9. Relationship Between Growth & Financial Requirements:
The Formula Method for Forecasting AFN
Financial Feasibility:
Effect of dividend policy on financing needs.

10. 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

11. The Formula Method for Forecasting AFN

12. Excess Capacity Adjustments:
The Formula Method for Forecasting AFN

13. The Formula Method for Forecasting AFN

14. The END
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