AFN Calculator

Formula

The formula to calculate the Additional Funds Needed (AFN) is:

\[ \text{AFN} = \text{IA} - \text{IL} - \text{IRE} \]

Where:

IA is the increase in assets ($).
IL is the increase in liabilities ($).
IRE is the increase in retained earnings ($).

What is AFN?

AFN stands for additional funds needed. It is a term used in business and finance to describe the additional resources ("funds") needed for a company to expand its operations to handle increases in assets. At its core, AFN is a way of understanding how liabilities will grow relative to assets and sales. When computing AFN, if the value is negative, then the project should generate extra income for the company.

Example Calculation

Let's consider an example:

Increase in Assets (IA): $100,000
Increase in Liabilities (IL): $30,000
Increase in Retained Earnings (IRE): $20,000

Using the formula to calculate the Additional Funds Needed (AFN):

\[ \text{AFN} = 100,000 - 30,000 - 20,000 = 50,000 \]

This means that the additional funds needed for this scenario are $50,000.