Explain the significance of the term additional funds needed.
While the pro forma balance sheet is completed, total assets and total liabilities and equity will hardly match. The discrepancy among forecasted assets and forecasted liabilities and equity results while either too little or too much financing is projected for the amount of asset growth supposed. The discrepancy is known as additional funds needed (AFN) while forecast assets exceed forecast liabilities and equity, and excess financing while forecast liabilities and equity exceed forecast assets.