The term “additional funds needed” (AFN), is generally defined as:
a. Funds that are obtained automatically from routine business transactions.
b. Funds that a firm must raise externally from non-spontaneous sources, i.e., through borrowing or by selling a new stock, to support operations.
c. The amount of assets required per dollar of sales.
d. The amount of internally generated cash in a given year minus the amount of cash needed to acquire the new assets needed to support growth.
e. A forecasting approach in which the forecasted percentage of sales for each balance sheet account is held constant.