The Term "Additional Funds Needed (AFN)" Is Generally Defined as Follows

question 26

Multiple Choice

The term "additional funds needed (AFN) " is generally defined as follows:

• A) Funds that a firm must raise externally from non-spontaneous sources, i.e., by borrowing or by selling new stock to support operations.
• B) The amount of assets required per dollar of sales.
• C) 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.
• D) A forecasting approach in which the forecasted percentage of sales for each balance sheet account is held constant.
• E) Funds that are obtained automatically from routine business transactions.

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Definitions:

Straight-Line Depreciation

A technique for distributing the expense of an asset equally over its lifespan.

Book Value

A financial metric that calculates the net asset value of a company's assets minus its liabilities, representing the shareholders' equity value in accounting terms.

Depreciation Expense

The portion of a fixed asset's cost allocated to expense across its useful life, reflecting the asset's consumption or decline in value.

Straight-Line

An approach where the expense of an asset is uniformly allocated across its lifespan to calculate depreciation.