2. The Formula Method for Forecasting
AFN(Additional Funds Needed)
â˘Forecasting is the iterative process both in way Financial
Statements are generated & Financial plan is developed.
â˘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:
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
â˘Economies of Scale
â˘Lumpy Assets
â˘No optimal Starting
point Ratios
The Formula Method for Forecasting AFN