Additional Funds Needed (AFN) Calculator

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Total sales revenue for the most recently completed year. This is the base from which growth is measured.
Forecasted sales for the next year or planning period. The difference between projected and current sales drives the asset and liability increases.
Total assets that scale directly with sales: cash, receivables, inventory, and other current assets that grow proportionally as revenue grows. Exclude fixed assets that have spare capacity.
Liabilities that rise automatically with sales without any explicit financing decision: accounts payable, accrued wages, and accrued taxes. Exclude bank loans and long-term debt.
Net income as a percentage of projected sales. For example, if you expect $520,000 net income on $6,500,000 in sales, the margin is 8%.
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The percentage of net income paid out as dividends. The remainder is retained and partially offsets the need for external funds. A payout of 0% means all earnings are retained.
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Currency
Additional Funds NeededExternal financing required
$476,000

External financing required. Positive means the company must raise funds; negative means it will generate a surplus that can be invested or used to retire debt.

Required asset increase$1,050,000
Spontaneous liability increase$210,000
Additional retained earnings$364,000
Projected net income$520,000
Sales increase (dS)$1,500,000
Capital intensity ratio (A*/S0)0.7
Retention ratio (RR)0.7%
Sales growth rate0.3%
Required asset increase$1,050,000
Spontaneous liability increase$210,000
Retained earnings$364,000
External financing gap (AFN)$476,000

This growth plan requires $476,000 in external financing.

  • To grow sales from $5,000,000 to $6,500,000 (30.0%), the business needs $1,050,000 in new assets.
  • Spontaneous liabilities cover $210,000 and retained earnings cover $364,000, leaving a gap of $476,000 to raise externally.
  • The capital intensity ratio is below 1.0, so the asset base is relatively lean; growth requires proportionally less external capital.

Next stepCompare debt financing costs against equity dilution. Run the calculator again with a lower payout ratio or higher margin assumption to see how much the gap can be closed internally before going to capital markets.

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