AFN = Additional Fund Needed

Forecasted, usually replaced by Pro-forma

AFN = Change in Total Asset – Change in Retained Earning – Change in Account Receivable

AFN (2016) = (1,250 – 1,000) – (70% × 2.52% × 2,500) – (125 – 100) = 250 – 44.1 – 25 = 180.9

Element to determine AFN:

Asset / Sales or Intensity Ratio

Account Payable

Profit Margin Ratio

Payout Ratio

Excess Capacity

Ratios:

Basic Earnings Power = EBIT / Total Asset

Profit Margin = NI / Sales

Return on Equity = Net Income / Total Equity

Days Sales Outstanding = 365 / (Sales / Account Receivable)

Inventory Turnover = Sales / Inventory

Fixed Asset Turnover = Sales / Fixed Asset

Total Asset Turnover = Sales / Total Asset

Liability / Asset

Times Interest Earned = EBIT / Interest

Current Ratio = Current Asset / Current Liability

Payout Ratio = Dividend / Net Income

NWC (Net Working Capital) = Current Asset – Current Liability

NOWC (Net Operating Working Capital) = Current Asset – Interest-bearing Current Liability