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Describe the importance of additional funds required

Describe the importance of the term additional funds required.

While the pro forma balance sheet is finished, total liabilities and total assets and equity will rarely match.  The discrepancy among forecasted assets and forecasted liabilities and equity results while either too little or too much financing is projected for the amount of asset growth expected.  The discrepancy is termed additional funds needed (AFN) while forecast assets exceed forecast liabilities and equity, and excess financing while forecast liabilities and equity exceed forecast assets.

 

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