Explain the significance of the term additional funds needed.
When the pro forma balance sheet is finished, total liabilities and total assets and equity will rarely match. The discrepancy among forecasted assets and forecasted liabilities and equity results when either too much or too little financing is projected for the amount of asset growth expected. The discrepancy is called as additional funds needed (AFN) when forecast assets go beyond forecast liabilities and excess financing and equity when forecast liabilities and equity exceed forecast assets.